2015 LOCAL GOVERNMENT AGENCY FEDERAL AWARD COMPLIANCE CONTROL RECORD

LOCAL GOVERNMENT AGENCY

FEDERAL AWARD COMPLIANCE CONTROL RECORD 1

NAME OF CLIENT:

YEAR ENDED: 2015

FEDERAL AWARD NAME: Twenty-First Century Community Learning Centers

CFDA#: # 84.287

NOTE:

 AOS wrote this FACCR for programs that pass through the Ohio Department of Education, and the

USDE crosscutting requirements apply to, but does not include ARRA requirements, and the new

Uniform Guidance does not apply. o You must document in your w/p’s how the determination was made that this major program fell under the old OMB Circulars (A-87 & A-102), as opposed to the new Uniform Grants

Guidance.

 Updated in September 2015 for edits to MOE tests in Section G.

Update yellow highlighted items based on specific program/grant.

Grey highlighted information was obtained from the pass through agency, the Ohio Department of Education.

Orange highlighted text is additional information from AOS Center for Audit Excellence (CFAE)

Prepared by AA

Reviewed by AM

Reviewed by SAM

Date

Date

Date

(NOTE: The above sign-off boxes are n/a to AOS audits completed in Teammate. AOS auditors should perform their sign-offs in the Teammate system.)

Updated September 2015

1 The auditor should always:

 Ask the client if there have been any changes in program requirements.

 Review the contracts/grant agreements for such changes or other modifications.

If changes are noted, document them in the W/P’s and consult with Center for Audit Excellence for an appropriate

FACCR modification.

Planning Federal Materiality by Compliance Requirement

(6) CFAE included the typical monetary vs. nonmonetary determinations for each compliance requirement in this program. However, auditors should tailor these assessments as appropriate based on the facts

(1) and circumstances of their entity’s operations. See further guidance below.

(2) (6) (6) (3) (4) (5) (5) (6)

Applicable per

Compl.

Suppl.

Direct & material to program / entity

Monetary or nonmonetary

If monetary, population subject to require.

Inherent risk

(IR) assess.

Final control risk (CR) assess.

Detection risk of noncompl.

Overall audit risk of noncompl.

Federal materiality by compl. requirement

Compliance Requirement

A Activities Allowed or Unallowed

B Allowable Costs/Cost Principles

C Cash Management

D Reserved

E Eligibility

F Equipment & Real Property Mgmt

G Matching, Level of Effort,

Earmark

(Yes or No)

Yes

Yes

Yes

No

No

Yes

(Yes or No) (M/N)

M

M

N

Mat. & Ear. =

M

MOE = N

M

(Dollars) (High/Low) (High/Low) (High/Low) (High/Low) typically 5% of population subject to requirement

5%

5%

5%

5%

H Period of Availability

(Performance)

I Procurement & Sus. & Debarment

J Program Income

K Reserved

L Reporting

M Subrecipient Monitoring

N Special Tests & Provisions

Participation of Private School

Children

N Special Tests & Provisions

Schoolwide Programs

Yes

No

Yes

Yes

Yes

Yes

Yes

M

N

N

N

N

5%

5%

(1) Taken from Part 2, Matrix of Compliance Requirements, of the OMB Compliance Supplement ( http://www.whitehouse.gov/omb/financial_fin_single_audit/ ). When Part 2 of the Compliance Supplement indicates that a type of compliance requirement is not applicable, the remaining assessments for the compliance requirement are not applicable.

5%

5%

5%

5%

(2) If the Supplement notes a compliance requirement as being applicable to the program in column (1), it still may not apply at a particular entity either because that entity does not have activity subject to that type of compliance requirement, or the activity could not have a material effect on a major program. If the Compliance Supplement indicates that a type of compliance requirement is applicable and the auditor determines it also is direct and material to the program at the specific entity being audited, the auditor should answer this question “Yes,” and then complete the remainder of the line to document the various risk assessments, sample sizes, and references to testing. Alternatively, if the auditor determines that a particular type of compliance requirement that normally would be applicable to a program (as per part 2 of the Compliance Supplement) is not direct and material to the program at the specific entity being audited, the auditor should answer this question “No.” Along with that response, the auditor should document the basis for the determination (for example, "Davis-Bacon Act does not apply because there were no applicable contracts for construction in the current period" or "per the Compliance Supplement, eligibility requirements only apply at the state level").

(3) Refer to the AICPA Audit Guide Government Auditing Standards and Circular A-133 Audits, chapter 10, Compliance Auditing Applicable to Major Programs, for considerations relating to assessing inherent risk of noncompliance for each direct and material type of compliance requirement. The auditor is expected to document the inherent risk assessment for each direct and material compliance requirement.

(4) Refer to the AICPA Audit Guide Government Auditing Standards and Circular A-133 Audits, chapter 9, "Internal Control Over Compliance for Major Programs," for considerations relating to assessing control risk of noncompliance for each direct and material types of compliance requirement. To determine the control risk assessment, the auditor is to document the five internal control components of the Committee of

Sponsoring Organizations of the Treadway Commission (COSO) (that is, control environment, risk assessment, control activities, information and communication, and monitoring) for each direct and material type of compliance requirement. Keep in mind that the auditor is expected to perform procedures to obtain an understanding of internal control over compliance for federal programs that is sufficient to plan the audit to support a low assessed level of control risk. If internal control over compliance for a type of compliance requirement is likely to be ineffective in preventing or detecting noncompliance, then the auditor is not required to plan and perform tests of internal control over compliance. Rather, the auditor must assess control risk at maximum, determine whether additional compliance tests are required, and report a significant deficiency (or material weakness) as part of the audit findings. The control risk assessment is based upon the auditor's understanding of controls, which would be documented outside of this template.

Auditors may use the practice aid, Controls Overview Document, to support their control assessment. The Controls Overview Document assists the auditor in documenting the elements of COSO, identifying key controls, testing of those controls, and concluding on control risk. The practice aid is available in either a checklist or narrative format.

(5) Audit risk of noncompliance is defined in Statement on Auditing Standards No. 117, Compliance Audits (AICPA, Professional Standards, vol. 1, AU sec. 801 / AU-C 935), as the risk that the auditor expresses an inappropriate opinion on the entity's compliance when material noncompliance exists. Audit risk of noncompliance is a function of the risks of material noncompliance and detection risk of noncompliance.

(6) CFAE included the typical monetary vs. nonmonetary determinations for each compliance requirement in this program. However, auditors should tailor these assessments as appropriate based on the facts and circumstances of their entity’s operations. AICPA A-133 Guide 10.49 states t he auditor's tests of compliance with compliance requirements may disclose instances of noncompliance. Circular A-133 refers to these instances of noncompliance, among other matters, as “findings.” Such findings may be of a monetary nature and involve questioned costs or may be nonmonetary and not result in questioned costs. AU

801 / AU-C 935.13 & .A7 require auditors to establish and document two materiality levels: (1) a materiality level for the program as a whole. The column above documents quantitative materiality at the

PROGRAM LEVEL for each major program; and (2) a second materiality level for the each of the applicable 12 compliance requirement listed in A-133 § .320(b)(2)(xii).

Note:

a. If the compliance requirement is of a monetary nature, and b. The requirement applies to the

total

population of program expenditure,

Then the compliance materiality amount for the program also equals materiality for the requirement. For example, the population for allowable costs and cost principles will usually equal the total Federal expenditures for the major program as a whole. Conversely, the population for some monetary compliance requirements may be less than the total Federal expenditures. Auditors must carefully determine the population subject to the compliance requirement to properly assess Federal materiality. Auditors should also consider the qualitative aspects of materiality. For example, in some cases, noncompliance and internal control deficiencies that might otherwise be immaterial could be significant to the major program because they involve fraud, abuse, or illegal acts. Auditors should document PROGRAM LEVEL materiality in the Record of Single Audit Risk (RSAR).

(Source: AOS CFAE)

Filename: A133 FACCR 84287 21st Century 2015 (non-ARRA non-UG) Sept15.docx CFDA # 84.287 - 3/91

* Cross-reference to the working papers where the tests of controls or compliance tests have been performed.

The A-102 Common Rule

A-102 Common Rule applies to State & Local Governments; A-110 (2 CFR Part 215) applies to Universities & Non-Profit

Organizations.

Use the following convention to refer to the federal agency codification of the A-102 Common Rule: (A-102 Common

Rule: §___.36). Auditors should replace the “§___” with the applicable numeric reference.

Appendix II of the OMB Compliance Supplement identifies each agency’s codification of the A-102

Common Rule. If a citation is warranted, auditors should look up where the federal awarding agency codified the A-102 Common Rule. For example, a Cash Management citation for a U.S. Department of

Education grant would cite 34 CFR 80.21 (34 CFR 80 coming from Appendix II of the OMB Compliance

Supplement, and .21 coming from Section C below, Source of Governing Requirements for A-102 Common

Rule entities. There are other “sources of governing requirements” noted in each section as well, this is just an explanation for the A-102 Common Rule references.

Appendix I of the OMB Compliance Supplement includes a list of programs excluded from the requirements of the A-102

Common Rule.

(Source: AOS CFAE)

Conclusion

The opinion on this major program should be:

Unqualified:

Qualified (describe):

Adverse (describe):

Disclaimer (describe):

Cross-reference to significant compliance requirements obtained from reviewing the grant agreement; terms and conditions; etc. , if any, added to and documented within the FACCR by auditor (Note: Audit staff should document these items within the appropriate FACCR section for the 12 compliance requirements. Likewise, auditors should indicate below if there were no additional significant compliance requirements to be added to the FACCR.):

Cross-reference to internal control matters (significant deficiencies or material weaknesses), if any, documented in the FACCR:

Cross-reference to questioned costs and matter of noncompliance, if any, documented in this FACCR:



Cross-reference to any Management Letter items and explain why not included in the A-133 Report:

Per paragraph 13.38 of the AICPA Audit Guide,

Government Auditing Standards and Circular A-133 Audits

following are required to be reported as audit findings in the federal awards section of the schedule of findings and questioned costs :

 Significant deficiencies or material weaknesses in internal control over major programs

, the

 Material noncompliance with the laws, regulations, and provisions of contracts and grant agreements related to major programs

 Known questioned costs that are greater than $10,000 for a type of compliance requirement for a major program. The auditor also should report (in the schedule of findings and questioned costs) known questioned costs when likely questioned costs are greater than $10,000 for a type of compliance requirement for a major program.

 Known questioned costs that are greater than $10,000 for programs that are not audited as major.

 The circumstances concerning why the auditor's report on compliance for major programs is other than an unmodified opinion, unless such circumstances are otherwise reported as audit findings in the schedule of findings and questioned costs for federal awards (for example, a scope limitation that is not otherwise reported as a finding).

 Known fraud affecting a federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for federal awards.

 Instances in which the results of audit follow-up procedures disclosed that the summary schedule of prior audit findings prepared by the auditee in accordance with Section 315(b) of Circular A-133 materially misrepresents the status of any prior audit finding.

Per paragraph 13.44 of the AICPA Audit Guide,

Government Auditing Standards and Circular A-133 Audits

, the schedule of findings and questioned costs should include all audit findings required to be reported under Circular A-133. A separate written communication (such as a communication sometimes referred to as a management letter) may not be used to communicate such matters to the auditee in lieu of reporting them as audit findings in accordance with Circular

A-133. See the discussion beginning at paragraph 13.33 for information on Circular A-133 requirements for the schedule of findings and questioned costs. If there are other matters that do not meet the Circular A-133 requirements for reporting but, in the auditor's judgment, warrant the attention those charged with governance, they should be communicated in writing or orally.

If such a communication is provided in writing to the auditee, there is no requirement for that communication to be referenced in the Circular A-133 report. Per table 13-2 a matter must meet the following in order to be communicated in the management letter:

 Other deficiencies in internal control over compliance that are not significant deficiencies or material weaknesses required to be reported but, in the auditor's judgment, are of sufficient importance to be communicated to management.

 That does not meet the criteria for reporting under Circular A-133 but, in the auditor's judgment, is of sufficient importance to communicate to management or those charged with governance

 That is less than material to a major program and not otherwise required to be reported but that, in the auditor's judgment, is of sufficient importance to communicate to the auditee

 Other findings or issues arising from the compliance audit that are not otherwise required to be reported but are, in the auditor's professional judgment, significant and relevant to those charged with governance.

Management Letter items and reasons why not reported in the A-133 report:









Performing Tests to Evaluate the Effectiveness of Controls throughout this FACCR

Auditors should consider the following when evaluating, documenting, and testing the effectiveness of controls throughout this FACCR:

As noted in paragraph 9.03 of the A-133 Guide, Circular A-133 states that the auditors should perform tests of internal controls over compliance as planned. (Paragraphs 9.27—.29 of the

AICPA Government Auditing Standards and Circular A-

133 Guide

discuss an exception related to ineffective internal control over compliance.) In addition, paragraph .08 of AU-

C section 330 states that the auditor should perform tests of controls when the auditor's risk assessment includes an expectation of the operating effectiveness of control. Testing of the operating effectiveness of controls ordinarily includes procedures such as (a) inquiries of appropriate entity personnel, including grant and contract managers; (b) the inspection of documents, reports, or electronic files indicating performance of the control; (c) the observation of the application of the specific controls; and (d) reperformance of the application of the control by the auditor. The auditor should perform such procedures regardless of whether he or she would otherwise choose to obtain evidence to support an assessment of control risk below the maximum level.

Paragraph .A24 of AU-C section 330 provides guidance related to the testing of controls. When responding to the risk assessment, the auditor may design a test of controls to be performed concurrently with a test of details on the same transactions. Although the purpose of a test of controls is different from the purpose of a test of details, both may be accomplished concurrently by performing a test of controls and a test of details on the same transaction (a dual-purpose test). For example, the auditor may examine an invoice to determine whether it has been approved and whether it provides substantive evidence of a transaction. A dual purpose test is designed and evaluated by considering each purpose of the test separately.

9 Also, when performing the tests, the auditor should consider how the outcome of the test of controls may affect the auditor's determination about the extent of substantive procedures to be performed. See chapter 11 of this guide for a discussion of the use of dual purpose samples in a compliance audit.

(Source: Paragraphs 9.31 and 9.33 of the

AICPA Government Auditing Standards and Circular A-133 Guide

)

I. Program Objectives

The objective of this program is to establish or expand community learning centers that provide students with academic enrichment opportunities along with activities designed to complement the students’ regular academic program.

Community learning centers must also offer families of these students literacy and related educational development.

Centers, which can be located in elementary or secondary schools or other similarly accessible facilities, provide a range of high-quality services to support student learning and development, including tutoring and mentoring, homework help, academic enrichment (such as hands-on science or technology programs), and community service opportunities, as well as music, arts, sports and cultural activities. At the same time, centers help working parents by providing a safe environment for students during non-school hours or periods when school is not in session.

(Source: 2015 OMB Compliance Supplement, Part 4)

II. Program Procedures

With enactment of the No Child Left Behind Act of 2001 (NCLB), the requirements for this program were modified from those previously established under the Improving America’s Schools Act (IASA). The NCLB converted the 21st Century

Community Learning Centers (CCLC) authority to a State formula grant program. In past years, the U. S. Department of

Education (ED) made competitive awards directly to local educational agencies (LEAs). Under the reauthorized authority, funds flow to States based on their share of Title I, Part A funds. States, in turn, use their allocations to make competitive awards to eligible entities. The Secretary of Education awards 21st CCLC grants through a formula grant process to States; the States then award, through a competitive process, subgrants to LEAs, community-based organizations (CBOs), other public or private entities, or consortia of two or more of such agencies, organizations, or entities.

ESEA Flexibility



Under ESEA flexibility, a State educational agency (SEA) may request flexibility to permit an eligible entity to use funds under the 21st CCLC program to provide activities that support high-quality expanded learning time during an expanded school day, week, or year in addition to activities during non-school hours or periods when school is not in session ( before and after school or during summer recess). Under certain conditions, as established by individual States, and existing 21 st CCLC subgrantee may implement the flexibility afforded by the 21 st

i.e.

,

CCLC waiver under SEA flexibility when the scope and objectives of the project remain the same. With the exception of carrying out 21st CCLC activities during an expanded school day, week, or year, an eligible entity in a State that receives a waiver must comply with all other 21st

CCLC requirements. In other words, other provisions of the 21st CCLC program remain unchanged, including the allocation of funds to SEAs by formula, the requirement that SEAs use 95 percent of their State formula grants to make competitive subgrants, and the entities eligible to compete for those subgrants (which consist of LEAs, community-based organizations, other public or private entities, and consortia of those entities) (see page 2, paragraph 11, of

ESEA

Flexibility

(June 7, 2012)). See further information below under cross-cutting requirements. o Only new FY 13 21st CCLC applications are eligible to apply for the 21st CCLC flexibility to use 21st CCLC program funds to support expanded learning time during the school day in addition to activities during non-school hours or periods when school is not in session (i.e., before and after school or during summer recess). (Source: ESEA

Flexibility Waiver Impact on FY13 21st CCLC Applicants, February 15, 2012 https://ccip.ode.state.oh.us/documentlibrary/ViewDocument.aspx?DocumentKey=78081 )


US Department of Education Cross-Cutting Requirements:

The ESEA was amended January 8, 2002 by the No Child Left Behind Act of 2001 (NCLB) (Pub. L. No. 107-110).

Plans for ESEA Programs

An SEA must either develop and submit separate, program-specific individual State plans to ED for approval as provided in individual program requirements outlined in the ESEA or submit, in accordance with Section 9302 of the ESEA, a consolidated plan to ED for approval. Consolidated plans will provide a general description of the activities to be carried out with ESEA funds. Subgrants to LEAs and other eligible entities and amounts to be used for State activities are often set by law for ESEA programs. However, SEAs have discretion in using funds available for State activities.

LEAs also have the choice in many cases of submitting individual program plans or a consolidated plan to the SEA to receive program funds. SEAs with approved consolidated State plans may require LEAs to submit consolidated plans.

Unique Features of ESEA Programs That May Affect the Conduct of the Audit

Consolidation of administrative funds

(In addition to the compliance requirement described in Part A of this FACCR)

SEAs and LEAs (with SEA approval) may consolidate Federal funds received for administration under many ESEA programs, thus eliminating the need to account for these funds on a program-by-program basis. The amount from each applicable program set aside for State consolidation may not be more than the percentage, if any, authorized for State administration under that program. The amount set aside under each covered program for local consolidation may not be more than the percentage, if any, authorized for local administration under that program. Expenditures using consolidated administrative funds may be charged to the programs on a first in/first out method, in proportion to the funds provided by each program, or another reasonable manner.

ESEA programs in this Supplement to which this section applies are: Title I, Part A (84.010); MEP (84.011); CSP (84.282);

21st CCLC (84.287); Title III, Part A (84.365); MSP (84.366) (at the LEA level only); Title II, Part A (84.367); and SIG

(84.377 and 84.388).

State and local administrative funds that are consolidated (as described in III.A.1, “Activities Allowed or Unallowed –

Consolidation of Administrative Funds (SEAs and LEAs”)) should be included in the audit universe and the total



expenditures of the programs from which they originated for purposes of (1) determining Type A programs, and (2) completing the Schedule of Expenditures of Federal Awards (SEFA). A footnote showing, by program, amounts of administrative funds consolidated is encouraged.

Schoolwide Programs

(In addition to the compliance requirement described in Part A of this FACCR)

Eligible schools are able to use their Title I, Part A funds, in combination with other Federal, State, and local funds, in order to upgrade the entire educational program of the school and to raise academic achievement for all students.

Except for some of the specific requirements of the Title I, Part A program, Federal funds that a school consolidates in a schoolwide program are not subject to most of the statutory or regulatory requirements of the programs providing the funds as long as the schoolwide program meets the intent and purpose of those programs. The Title I, Part A requirements that apply to schoolwide programs are identified in the Title I, Part A program-specific section. If a school does not consolidate Federal funds with State and local funds in its schoolwide program, the school has flexibility with respect to its use of Title I, Part A funds, consistent with Section 1114 of ESEA (20 USC 6314), but it must comply with all statutory and regulatory requirements of the other Federal funds it uses in its schoolwide program

ESEA programs in this Supplement to which this section applies are: Title I, Part A (84.010); MEP (84.011); 21st CCLC

(84.287); Title III, Part A (84.365); MSP (84.366); Title II, Part A (84.367); and SIG (84.377 and 84.388).

This section also applies to IDEA (84.027 and 84.173) and CTE (84.048).

Since schoolwide programs are not separate Federal programs, as defined in OMB Circular A-133, expenditures of Federal funds consolidated in schoolwide programs should be included in the audit universe and the total expenditures of the programs from which they originated for purposes of (1) determining Type A programs and

(2) completing the SEFA. A footnote showing, by program, amounts consolidated in schoolwide programs is encouraged.

Transferability

(In addition to the compliance requirement described in Parts A & G of this FACCR)

SEAs and LEAs (with some limitations) may transfer funds from one or more applicable programs to one or more other applicable programs, or to Title I, Part A. Transferred funds are subject to all of the requirements, set-asides, and limitations of the programs into which they are transferred, except as modified under ESEA flexibility.

ESEA programs in this Supplement to which this section applies are: 21st CCLC (84.287

) and Title II, Part A (84.367)

.

Expenditures of funds transferred from one program to another (as described in III.A.3, “Activities Allowed or Unallowed

– Transferability (SEAs and LEAs)”) should be included in the audit universe and total expenditures of the receiving program for purposes of (1) determining Type A programs, and (2) completing the SEFA. A footnote showing amounts transferred between programs is encouraged by OMB and has been requested by ODE.

Other Information

Prima Facie Case Requirement for Audit Findings

Section 452(a)(2) of the General Education Provisions Act (20 USC 1234a(a)(2)) requires that ED officials establish a

prima facie

case when they seek recoveries of unallowable costs charged to ED programs. When the preliminary ED decision to seek recovery is based on an OMB Circular A-133 audit, upon request, auditors will need to provide ED program officials audit documentation. For this purpose, audit documentation (part of which is the auditor’s working papers) includes information the auditor is required to report and document that is not already included in the reporting package.

The requirement to establish a

prima facie

case for the recovery of funds applies to all programs administered by ED, with the exception of Impact Aid (CFDA 84.041) and programs under the Higher Education Act, i.e., the Family Federal

Education Loan Program (CFDA 84.032) and the other ED programs covered in the Student Financial Assistance Cluster in

Part 5 of the Supplement.

Waivers and Expanded Flexibility



Under Title IX of the ESEA, State educational agencies (SEAs), Indian tribes, local educational agencies (LEAs), and schools through their LEA may request waivers from ED of many of the statutory and regulatory requirements of programs authorized in the ESEA. In addition, some States may have been granted authority to grant waivers of Federal requirements under the Education Flexibility Partnership Act of 1999.

ESEA Flexibility

On September 23, 2011, ED invited States to request flexibility on behalf of the State, its LEAs, and its schools to better focus on improving student achievement and increasing the quality of instruction (ESEA flexibility). This voluntary opportunity provides SEAs and LEAs, in States whose requests for ESEA flexibility have been approved, with waivers of specific requirements of the ESEA in exchange for rigorous and comprehensive State-developed plans designed to improve educational outcomes for all students, close achievement gaps, increase equity, and improve the quality of instruction. States receiving ESEA flexibility before November 1, 2012, and LEAs in those States, began implementing the plans contained in their request in the 2012–2013 school year. Those waivers applied through the end of the 2013-2014 school year, and States with waivers that expired at that time could request a one-year extension of ESEA flexibility through the 2014-2015 school year. Other States received ESEA flexibility after October 31, 2012, and LEAs in those

States began implementing the plans contained in their request in the 2013–2014 school year. Those waivers generally apply through the end of the 2014-2015 school year.

Those waivers apply through the end of the 2013-2014 school year. For a list of the waivers offered, see

ESEA Flexibility

.

A list of the States that have requested waivers is available at http://www.ed.gov/esea/flexibility . [As noted at this link, Ohio’s ESEA flexibility request was approved on May 29, 2012.]

[In addition, Ohio’s ESEA 1 year extension of flexibility was granted on August 21, 2014 for the 2014-2015 school year.]

ESEA programs in this Supplement to which ESEA flexibility applies are

:

Title I, Part A (84.010); 21st CCLC (84.287);

Title II, Part A (84.367); and SIG (84.377 and 84.388).

See III.G.2.2, “Level of Effort – Supplement Not Supplant,”

III.G.3.b, “Transferability,” III.N.2, “Special Tests and Provisions – Schoolwide Programs,” and the individual program supplements for testing related to ESEA flexibility.

Auditors should ascertain from the audited SEAs and LEAs whether the SEA or the LEA or its schools are operating under

ESEA flexibility or any other approved waivers.

Any requested waivers would be reviewed/approved by the ODE waiver committee.

General and Program-Specific Cross-Cutting Requirements

The requirements in the cross-cutting section can be classified as either general or program-specific. General crosscutting requirements are those that are the same for all applicable programs but are implemented on an entity-level.

These requirements need only be tested once to cover all applicable major programs. The general cross-cutting requirements that the auditor only need test once to cover all applicable major programs are: III.G.2.1, “Level of Effort-

Maintenance of Effort (SEAs/LEAs);” III.L.3, “Special Reporting;” and, III.N, “Special Tests and Provisions” (III.N.2,

“Schoolwide Programs;” and III.N.3, “Comparability”). Program-specific cross-cutting requirements are the same for all applicable programs, but are implemented at the individual program level. These types of requirements need to be tested separately for each applicable major program. The compliance requirement in III.N.1, “Participation of Private

School Children,” may be tested on a general or program-specific basis.

In recent years, the Office of Inspector General in ED has investigated a number of significant criminal cases related to the risk of misuse of Federal funds and the lack of accountability of Federal funds in public charter schools. Auditors should be aware that, unless an applicable program statute provides otherwise, public charter schools and charter school

LEAs are subject to the requirements in this cross-cutting section to the same extent as other public schools and LEAs.

Auditors also should note that, depending upon State law, a public charter school may be its own LEA or a school that is part of a traditional LEA.

Program procedures for non-ESEA programs covered by this cross-cutting section and additional information on program procedures for the ESEA programs are set forth in the individual program sections of this Supplement.




III. Program Specific Information

State of Ohio

Application Access

The Ohio Department of Education (ODE) administers a number of federal programs under which subawards are made to

Local Educational Agencies (LEAs). ODE uses a Consolidated Application (CA), known as the Comprehensive Continuous

Improvement Plan, for several of these programs. The CA is an online form completed by the LEA and constitutes the

LEA’s application for various federal programs (certain federal programs administered by ODE are not awarded through the consolidated application).

Following is a summary of the CA contents and related access. This summary is only intended to give auditors sufficient information to get started and to provide a general understanding of available information. For answers to more specific questions, auditors should inquire of appropriate LEA or ODE personnel and review the various documents available in the document library discussed below.

Some of the information included in the CA includes:

 An application status history log

 A summary of federal allocations by federal program (including carryover and transfer information)

 Individual program applications including: o Program specific schedules and worksheets (For example: supporting school-wide building eligibility, or documenting nonpublic school participation information) o Program budget o Program improvement plan goals and strategies (application narrative) o Additional program schedules (usually identifying which allowable activities are being proposed)

 Assurances

Each LEA’s consolidated application is available on ODE’s website under the Comprehensive Continuous Improvement

Planning section (CCIP). The specific location is currently: https://ccip.ode.state.oh.us/default.aspx

. This section allows the general public to review CAs for individual LEAs (“Search Districts” option). The section also includes a document library (“Doc Library”) with access to program specific guidance and CCIP/CA general information and instructions.

Select a specific LEA from the “Search Organization’s” option. From here you can obtain:

 The entire CA by selecting the Application (then Funding Application) option and selecting the type of application you wish to view. You can download the entire CA, or portions, by using the various “print” options on the screen.

Selecting a print option results in the creation of a PDF format document.

 Project Cash Requests (PCR) by selecting the “PCRs” option. You can then select the desired federal program which will result in a list of PCRs for that program and their status. Select the desired PCR to view it.

 Some fields are populated by ODE or by programmed calculations within the form. The LEA can only 1) enter total cash basis expenditures, 2) alter the advance amount requested (default is 10% of the total award for the month requested) and, 3) provide a justification of need explanation for any amount requested in excess of 10% of the total award or if more than 10% cash balance is on hand at the local entity.

 Final Expenditure Reports are available online on the funding application’s section page of ODE’s website.

Note: As the grant application, budget, project cash requests, and final expenditure reports are readily available online, it is anticipated that LEAs may not have paper copies of certain documents. The online documents will be sufficient for audit purposes.

(Source: Ohio Department of Education Office of Federal and State Grants Management)

IV. Source of Governing Requirements (CFR, USC, grantor manual section, etc.)

This program is authorized under Title IV, Part B of the Elementary and Secondary Education Act of 1965 (ESEA), as amended by the NCLB (20 USC 7171 et seq.; Section 4201 et seq. of Pub. L. No. 107-110, 115 Stat. 1765, January 8,



2002).


Availability of Other Program Information

Information on this program can be found in Non-Regulatory Guidance on the 21st Century Learning Centers (February

2003) at: http://www.ed.gov/programs/21stcclc/guidance2003.pdf

.

Additional information regarding Expanded Learning Time in 21st CCLC programs can be found in the 21st Century

Community Learning Centers (21st CCLC) Frequently Asked Questions (FAQs) Expanded Learning Time (ELT) under the

ESEA Flexibility Optional Waiver (July 2013) at http://www2.ed.gov/programs/21stcclc/21stcclc-elt-faq.pdf

.


US Department of Education Cross-Cutting Requirements:

The ESEA, as reauthorized by the NCLB, is available with a hypertext index at http://www.ed.gov/policy/elsec/leg/esea02/index.html

.

An ED

Federal Register

notice, dated July 2, 2004 (69 FR 40360-40365), indicating which Federal programs may be consolidated in a schoolwide program is available at http://www.gpo.gov/fdsys/pkg/FR-2004-07-02/pdf/04-15121.pdf

.

A number of documents contain guidance applicable to the cross-cutting requirements in the OMB Supplement. They include:

[NOTE: You should copy and paste these web addresses, rather than clicking on the links.]

 Guidance on the Transferability Authority

( http://www.ed.gov/programs/transferability/finalsummary04.doc

)

(June 8, 2004)

 Guidance on the Rural Education Achievement

( http://www.ed.gov/policy/elsec/guid/reap03guidance.doc

)

Program (REAP) (June 2003)

 State Educational Agency Procedures for Adjusting Basic, Concentration, Targeted, and Education Finance

Incentive Grant Allocations Determined by the U.S. Department of Education (May 23, 2003)

( http://www.ed.gov/programs/titleiparta/seaguidanceforadjustingallocations.doc

)

 Applying the Title I and School Improvement Hold-Harmless Requirements when Allocating Funds to Newly

Opening and Significantly Expanding Charter

( http://www2.ed.gov/programs/titleiparta/legislation.html#policy )

School LEAs (September 2013)

 How Does a State or Local Educational Agency Allocate Funds to Charter Schools that Are Opening for the First

Time or Significantly Expanding Their

( http://www.ed.gov/policy/elsec/guid/cschools/cguidedec2000.doc

)

Enrollment? (December 2000)

 Applying the Title I and School Improvement Hold-Harmless Requirements when Allocating Funds to Newly

Opening and Significantly Expanding Charter

( http://www2.ed.gov/programs/titleiparta/legislation.html#policy )

School LEAs (September 2013)

 Title I Services to Eligible Private

( http://www.ed.gov/programs/titleiparta/psguidance.doc

)

School Children (October 17, 2003)

 Title IX, Part E Uniform Provisions Subpart 1—Private Schools: Equitable Services to Eligible Private School

Students, Teachers, and Other Educational

( http://www.ed.gov/policy/elsec/guid/equitableserguidance.doc

)

Personnel (March 2009)



 Serving Preschool Children Through Title I, Part A of the Elementary and Secondary Education Act of 1965, as

Amended (April 16, 2012) ( http://www2.ed.gov/policy/elsec/guid/preschoolguidance2012.pdf

)

 Title I Fiscal Issues: Maintenance of Effort; Comparability; Supplement, not Supplant; Carryover; Consolidating

Funds in Schoolwide Programs; and

( http://www.ed.gov/programs/titleiparta/fiscalguid.doc

)

Grantback Requirements (February 2008)

 Designing Schoolwide Programs (March 2006) ( http://www.ed.gov/policy/elsec/guid/designingswpguid.doc

)



 ESEA Flexibility Frequently Asked

( http://www2.ed.gov/policy/eseaflex/esea-flexibility-faqs.doc

)

Questions



ESEA

( http://www.ed.gov/esea/flexibility/documents/esea-flexibility.doc

)

ESEA Flexibility

Flexibility

Addendum to Frequently

( http://www2.ed.gov/policy/eseaflex/faqaddendum.doc

)

(June

Asked

(August

Questions

7,

(March

3,

5,

2012)

2012)

2013)

 Letter to Chief State School Officers on Granting Administrative Flexibility for Better Measures of Success

(September 7,

( http://www2.ed.gov/policy/fund/guid/gposbul/time-and-effort-reporting.html?exp=3 )

2012)

 Letter and Enclosure on Flexibility in Schoolwide Programs (September 13, 2013)

( http://www2.ed.gov/programs/titleiparta/flexswp091313.pdf

)

 Non-Regulatory Guidance on Title I, Part A Waivers (July 2009) ( http://www.ed.gov/programs/titleiparta/title-iwaiver.doc

)

 Guidance on School Improvement Grants Under Section 1003(g) of the Elementary and Secondary Education Act of 1965 (Revised June 29, 2010) ( http://www2.ed.gov/programs/sif/sigguidance05242010.pdf

)

 Guidance on Fiscal Year 2010 School Improvement Grants Under Section 1003(g) of the Elementary and

Secondary Education Act of 1965 (March 1, 2012) ( http://www2.ed.gov/programs/sif/sigguidance03012012.doc

Two documents contain guidance applicable to the cross-cutting requirements affected by the Education Jobs Fund program (Ed Jobs). They include:

 Guidance – When to Treat Expenditures of Education Jobs Funds as State or Local Funds for Purposes of the

Fiscal Requirements under Title I, Part A of the Elementary and Secondary Education Act of 1965 (November

2010) ( http://www2.ed.gov/programs/titleiparta/fiscalejfguidance.doc

)

 Part B IDEA MOE Guidance for States on the Education Jobs Fund Program (May 2011)

( www2.ed.gov/policy/speced/guid/idea/idea-edjobs-guidance.pdf

).


Additional Guidance:

ODE Document Library: https://ccip.ode.state.oh.us/documentlibrary/default.aspx

OMB Compliance Supplements: http://www.whitehouse.gov/omb/financial_fin_single_audit/

AOS Guidance on federal sampling – Fall 2014



http://portal/BP/Intranet/Webinar%20Supplemental%20Materials/Fall%202014%20-%20Federal%20Sampling.pdf

V. Reporting in the Schedule of Expenditures of Federal Awards

The District should report federal receipts and disbursements for CFDA #84.287 in fund 599. At a minimum, the District should report the total fiscal year receipts and disbursements for each program. A-133.310(b)(2) requires including passthrough numbers (if any) on the Schedule. However, ODE informed us OAKS is not currently assigning pass-through numbers. Because ODE may reinstate pass-through numbers in the future, we suggest districts continue to create special cost centers in fund 599 to separately summarize amounts for each fiscal year. The Schedule should also report the following for 21 st Century Community Learning Centers:

The School District generally must spend Federal assistance within 15 months of receipt (funds must be obligated by June

30 th

 CFDA number: 84.287

 Grant Title: Twenty-First Century Community Learning Centers

 Receipts and disbursements for each pass-through number (i.e., cost center) in Fund 599.

and spent by September 30 th ).

PROJECT DURATION - Approved grants will be funded for a five-year period contingent upon new and continued USDOE's annual appropriation to the state. Beginning if FY 14, the first year of the grant awarded will be considered implementation or “probationary year”. Additional monitoring requirements will be addressed during the year including program implementation timeline, adherence to the approved grant application, implementation of service, sustainability planning, and program effectiveness will determine the continuation of funding into subsequent years. Additionally, the first three years will be funded at 100 percent, and the fourth and fifth years will be funded at 75 percent and 50 percent, respectively.

(Source: 21 st Century CLC Request for Applications http://education.ohio.gov/getattachment/Topics/Other-

Resources/21st-Century/21st-CCLC-Archived-Event-Information/FY14-Request-for-Applications.pdf.aspx

)

As described in §___.310(b)(3) of OMB Circular A-133, auditees must complete the SEFA and include CFDA numbers provided in Federal awards/subawards and associated expenditures.

____________________________________________________________________________________

NOTE: Legacy cash reports are available to schools and their auditors to aid in preparation of the SEFA. A cross walk of

Web

‐

GAAP alternatives is located within the Web

‐

GAAP wiki, which can be accessed using the following link: http://gaapwiki.oecn.k12.oh.us/images/1/19/4502Web ‐ GAAPAlternatives.pdf. A link to the entire Web ‐ GAAP wiki is provided on our intranet page under the auditor resources tab. Keep in mind that district use of Web ‐ GAAP is not mandatory and some districts may not utilize these reports. Any SEFA format is acceptable so long as it complies with the requirements above and those of OMB Circular A-133 §_.310(b). Additionally, as the pass-through agency, ODE requires school districts to report receipts as well as expenditures on the SEFA.

(Source: AOS CFAE)

FOOTNOTE TO THE FEDERAL SCHEDULE (If any funds were carried over to the next program year):

NOTE D – TRANSFERS

The School District generally must spend Federal assistance within 15 months of receipt (funds must be obligated by June

30 th and spent by September 30 th ). However, with ODE’s approval, a District can transfer unspent Federal assistance to the succeeding year, thus allowing the School District a total of 27 months to spend the assistance. Schools can document this by using special cost centers for each year’s activity, and transferring the amounts ODE approves between the cost centers. During fiscal year 200X, the Ohio Department of Education (ODE) authorized the following transfers:

CFDA

Number Program Title

Pass-Through

Entity Number

Transfers

Out Transfers In



84.010 Title I Grants to Local Educational Agencies

84.010 Title I Grants to Local Educational Agencies

84.027 Special Education - Grants to States

84.027 Special Education - Grants to States

84.173 Special Education - Preschool Grants

84.173 Special Education - Preschool Grants

84.318 Education Technology State Grants

84.318 Education Technology State Grants

84.367 Improving Teacher Quality State Grant

84.367 Improving Teacher Quality State Grant

Totals

VI. Improper Payments

(or Grant Year)

C1S1-200X-1

C1S1-200X

6BSF-200X-1

6BSF-200X

PGS1-200X-1

PGS1-200X

TJS1-200X-1

TJS1-200X

TRS1-200X-1

TRS1-200X

$ 20,034

2,754

554

62

3,109

$ 27,513

$ 20,034

2,754

554

62

3,109

$ 27,513

Under OMB guidance, Public Law (Pub. L.) No. 107-300, the Improper Payments Information Act of 2002, as amended by

Pub. L. No. 111-204, the Improper Payments Elimination and Recovery Act, Executive Order 13520 on reducing improper payments, and the June 18, 2010 Presidential memorandum to enhance payment accuracy, Federal agencies are required to take actions to prevent improper payments, review Federal awards for such payments, and, as applicable, reclaim improper payments. Improper payment means:

1. Any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements.

2.

3.

4.

Incorrect amounts are overpayments or underpayments that are made to eligible recipients (including inappropriate denials of payment or service, any payment that does not account for credit for applicable discounts, payments that are for the incorrect amount, and duplicate payments).

Any payment that was made to an ineligible recipient or for an ineligible good or service, or payments for goods or services not received (except for such payments where authorized by law).

Any payment that an agency’s review is unable to discern whether a payment was proper as a result of insufficient or lack of documentation.

Auditors should be alert to improper payments, particularly when testing the following parts - A, “Activities

Allowed or Unallowed;” B, “Allowable Costs/Cost Principles;” E, “Eligibility;” and, in some cases, N, “Special

Tests and Provisions.”




A. Activities Allowed or Unallowed

Audit Objectives

1) Obtain an understanding of internal control, assess risk, and test internal control as required by OMB Circular A-133

§___.500(c).

2) Determine whether Federal awards were expended only for allowable activities.

Compliance Requirements

Important Note: For a cost to be allowable, it must (1) be for a purpose the specific award permits and (2) fall within A-87’s (codified in 2 CFR Part 225) allowable cost guidelines. These two criteria are roughly analogous to classifying a cost by both program/function and object. That is, the grant award generally prescribes the allowable program/function while A-87 prescribes allowable object cost categories and restrictions that may apply to certain object codes of expenditures.

For example, could a government use an imaginary Homeland Security grant to pay OP&F pension costs for its police force? To determine this, the client (and we) would look to the grant agreement to see if police activities (security of persons and property function cost classification) met the program objectives. Then, the auditor would look to A-

87 to determine if pension costs (an object cost classification) are permissible. (A-87, Appendix B states they are allowable, with restrictions, so we would need to determine if the auditee met the restrictions.) Both the client and we should look at A-87 even if the grant agreement includes a budget by object code approved by the grantor agency.

(Source: AOS CFAE)

The specific requirements for activities allowed or unallowed are unique to each Federal program and are found in the laws, regulations, and the provisions of contract or grant agreements pertaining to the program.

For programs listed in the OMB Compliance Supplement, the specific requirements of the governing statutes and regulations are included in Part

4 – Agency Program Requirements or Part 5 – Clusters of Programs, as applicable. This type of compliance requirement specifies the activities that can or cannot be funded under a specific program.

Source of Governing Requirements

The requirements for activities allowed or unallowed are contained in program legislation, Federal awarding agency regulations, and the terms and conditions of the award.


Program Specific Requirements

Grant awards may be used to carry out a broad array of before- and after-school activities (including summer recess periods) that advance student academic achievement including: a.

Remedial education activities and academic enrichment learning programs, including providing additional assistance to students to allow the students to improve their academic achievement. b.

Mathematics and science education activities. c.

Arts and music education activities.

Entrepreneurial education programs.

Tutoring services (including those provided by senior citizen volunteers) and mentoring programs. d.

e.

f.

Programs that provide after school activities for limited English proficient students that emphasize language skills and academic achievement. g.

Recreational activities. h.

Telecommunications and technology education programs. i.

Expanded library service hours. j.

Programs that promote parental involvement and family literacy.



A. Activities Allowed or Unallowed k.

Programs that provide assistance to students who have been truant, suspended, or expelled to allow the students to improve their academic achievement. l.

Drug and violence prevention programs, counseling programs, and character education programs (20 USC

7175(a)). m.

If an SEA requests and is approved for a waiver of ESEA Sections 4201(b)(1)(A) and 4204(b)(2)(A) (ESEA

Flexibility), an eligible entity may use 21st CCLC funds to support expanded learning time during the school day in addition to activities during non-school hours or periods when school is not in session such as:

(1) Using the additional time to increase learning time for all students in areas of need;

(2)

(3)

(4)

Using the additional time to support a well-rounded education that includes time for academics and enrichment activities;

Providing additional time for teacher collaboration and common planning;

(5)

Partnering with one or more outside organizations, such as a nonprofit organization with demonstrated experience in improving student achievement;

Redesigning the whole school day to use time more strategically, especially in designing activities that are not “more of the same;”

(6)

(7)

Providing evidence-based activities and programs;

Personalizing instructional student supports;

(8)

(9)

Using data to inform ELT activities and practices; and

Directly aligning ELT activities to student achievement and preparation for college and careers (21 st CCLC FAQs on ELT (June 2013), pages 1-2, question 3).

Note that an eligible entity may use any one or more of these types of activities, consistent with the SEA’s approved flexibility application and consistent with the eligible entity’s 21 st CCLC application to the SEA.



1.

Consolidation of Administrative Funds

(SEAs/LEAs)

ESEA programs this Supplement to which this section applies are Title I, Part A (84.010); MEP (84.011); CSP

(84.282); 21st CCLC (84.287

); Title III, Part A (84.365); MSP (84.366) (at the LEA level only); Title II, Part A

(84.367); and SIG (84.377 and 84.388).

An LEA may, with the approval of its SEA, consolidate and use for the administration of one or more ESEA programs not more than the percentage, established in each program, of the total available under those programs. An LEA may use consolidated funds for the administration of the consolidated programs and for uses at the school district and school levels comparable to those authorized for the SEA. An LEA that consolidates administrative funds may not use any other funds under the programs included in the consolidation for administration (Section 9203 of ESEA (20

USC 7823)).

An SEA or LEA that consolidates administrative funds is not required to keep separate records of administrative costs for each individual program. Expenditures of consolidated administrative funds are allowable if they are for administrative costs that are allowable under any of the contributing programs (Sections 9201(c) and 9203(e) of

ESEA (20 USC 7821(c) and 7823(e))).

See Section N, “Special Tests and Provisions – Schoolwide Programs” for discussion of provisions relating to allowable activities for Schoolwide Programs.




See Part II, Program Procedures, for guidance on the treatment of consolidated administrative funds for purposes of

Type A program determination and presentation in the Schedule of Expenditures of Federal Awards (SEFA).

Program funds may also be used for Consolidation of Administrative Funds, Coordinated Services Projects, and

Schoolwide Programs under Title I. Also, unneeded Program Funds may be transferred to certain other federal programs. The requirements for these options and related testing guidance are included in Section G and N of this

FACCR.

NOTE: The Ohio Department of Education has not implemented consolidation of administrative funds or the coordinated services projects for its ESEA programs.


2.

Schoolwide Programs

(LEAs)

ESEA programs this Supplement to which this section applies are Title I, Part A (84.010); MEP (84.011); 21st CCLC

(84.287

); Title III, Part A (84.365); MSP (84.366); Title II, Part A (84.367); and SIG (84.377 and 84.388)

.

This section also applies to IDEA (84.027 and 84.173) and CTE (84.048).

An eligible school participating under Title I, Part A may, in consultation with its LEA, use its Title I, Part A funds, along with funds provided from the above-identified programs, to upgrade the school’s entire educational program in a schoolwide program. See “Special Tests and Provisions – Schoolwide Programs” for testing related to schoolwide programs (Section 1114 of ESEA (20 USC 6314)).

3.

See Part II, Program Procedures, for guidance on the treatment of consolidated schoolwide funds for purposes of

Type A program determination and presentation in the SEFA.

Transferability

(SEAs and LEAs)


) and Title II, Part A

(84.367)

.

Except for 21st CCLC (CFDA 84.287

), LEAs not identified for improvement or corrective action under Section 1116(c) of ESEA may also transfer up to 50 percent of the funds allocated to them from one or more of the listed applicable programs to another listed applicable program or to Title I, Part A. LEAs identified for improvement under Section

1116(c) may transfer up to 30 percent of the funds allocated to them for (a) school improvement under Section 1003 or (b) other LEA improvement activities consistent with Section 1116(c). LEAs identified for corrective action may not transfer funds (Sections 6123(a) and (b) of ESEA (20 USC 7305b(a) and (b))).

Transferred funds are subject to all of the requirements, set-asides, and limitations of the programs into which they are transferred (Section 6123(e) of ESEA (20 USC 7305b(e))).

In a State that has received ESEA flexibility [See Section II, Program Procedures, ESEA Flexibility] , an SEA or an LEA may transfer up to 100 percent of the funds available under one or more of the authorized ESEA programs among those programs and into Title I, Part A. This authority applies to all LEAs notwithstanding the limitations on such transfers and the restrictions on the use of the transferred funds in Section 6123(b)(1) of the ESEA (20 USC

7305b(b)(1)). Funds transferred under ESEA flexibility are not subject to any set-aside requirements of the programs into which they are transferred but they are subject to all of the requirements and limitations of those programs.

Moreover, an SEA is not required to notify ED, and its participating LEAs are not required to notify the SEA, prior to transferring funds (see paragraph 9 on page 2 of

ESEA Flexibility

). Note, however, that there is a limitation on the amount of Title II, Part A funds that may be transferred because of that program’s equitable services requirement




(see section III.G.2, “Matching, Level of Effort, Earmarking – Maintenance of Effort,” in the program supplement for

CFDA 84.367 for details).

 What are some examples of ways an eligible entity might use 21st CCLC funds to provide activities

that support expanded learning time? o The 21st CCLC activities may be carried out at any point in time during an extended school day, week, or year.

 For example, if an LEA lengthens its school day beyond the State minimum, the LEA or another eligible entity might use 21st CCLC funds to provide supplemental science, reading, civics, or art instruction or other supplemental academic enrichment activities to students in the morning or afternoon to allow teachers time to collaborate or plan.

 Similarly, an LEA working with a community partner, might use 21st CCLC funds to extend its school week and incorporate enrichment activities, such as debate or college preparation, on either Saturday or a week day.

 Using 21st CCLC funds to support expanded learning time should not be just “more of the same”; it should involve careful planning by the eligible entity to ensure that the programs or activities will be used to improve student achievement and ensure a well-rounded education that prepares students for college and careers.

(Source: ESEA Flexibility Waiver Impact on FY13 21st CCLC Applicants, February 15, 2012 https://ccip.ode.state.oh.us/documentlibrary/ViewDocument.aspx?DocumentKey=78081 )

See “Matching, Level of Effort, Earmarking – Earmarking,” for additional testing related to transferability.

See Part II, Program Procedures, for guidance on the treatment of funds transferred under this provision for purposes of Type A program determination and presentation in the SEFA.


Unallowable Activities:

 The purchase of real property is an unallowable Federal program cost for Ohio school districts.


 Ohio Revised Code 3313.24 states, in part: The board of education of each local, exempted village or city school district shall fix the compensation of its treasurer which shall be paid from the general fund of the district.

In spite of any additional duties in managing Federal or State funds, Federal and state law prohibits treasurers from receiving a supplemental contract for managing Federal or State funds . There are several Ohio statutes and the OMB Circular A-133 compliance supplement which require that position.

To ensure consistency of application, the Department considers all chief financial officers of educational entities, including but not limited to, non-profit corporations, colleges and universities to be similarly situated to treasurers of school districts. Additionally, as community schools discharge functions in a similar manner as school districts and community schools are considered local education agencies, as defined in 34 CFR parts 76 and 77, chief financial officers of community schools are treated as if they were treasurers of a traditional public school district.

(Source: http://education.ohio.gov/getattachment/Topics/Finance-and-Funding/State-Funding-For-

Schools/Career-Technical-Funding/Grants-Management-Guidance/Supplemental-Contracts.pdf.aspx

)

Additional Program Specific Requirements




The grant application, agreement, or policies may contain the specific requirements for activities allowed or unallowed.

(Source: )

In determining how the client ensures compliance, consider the following:

Obtain an understanding of internal control, assess risk, and test internal control as required by OMB Circular A-133

§___.500(c). Using the guidance provided in the 2013 COSO ( http://www.coso.org/IC.htm

), or GAO’s 2014 Green Book

( http://www.gao.gov/assets/670/665712.pdf

), perform procedures to obtain an understanding of internal control sufficient to plan the audit to support a low assessed level of control risk for the program. Plan the testing of internal control to support a low assessed level of control risk for Activities Allowed or Unallowed and perform the testing of internal control as planned. If internal control over some or all of the compliance requirements is likely to be ineffective, see the alternative procedures in §___.500(c)(3) of OMB Circular A-133, including assessing the control risk at the maximum and considering whether additional compliance tests and reporting are required because of ineffective internal control. For further AOS guidance on testing federal controls see http://portal/BP/Intranet/AA%20Training%20Fall%202011/FACCR%20Controls%20and%20Federal%20Update.pdf

– Fall

2011.

WP Ref. What control procedures address the compliance requirement?

Basis for the control (reports, resources, etc. providing information needed to understand requirements and prevent or identify and correct errors):

Control Procedure (description of how auditee uses the “Basis” to prevent, or identify and correct or detect errors):

Person(s) responsible for performing the control procedure (title):

Description of evidence documenting the control was applied (i.e. sampling unit):

Suggested Audit Procedures – Compliance (Substantive Tests)

Note: Consider the results of the testing of internal control in assessing the risk of noncompliance. Use this as the basis for determining the nature, timing, and extent (e.g., number of transactions to be selected) of substantive tests of compliance.

1) Identify (and document) the types of activities which are either specifically allowed or prohibited by the laws, regulations, and the provisions of contract or grant agreements pertaining to the program.

WP Ref.

2) When allowability is determined based upon summary level data (voucher summaries, etc.), perform procedures to verify that: a) Activities were allowable. b) Individual transactions were properly classified and accumulated into the activity total.

3) When allowability is determined based upon individual transactions, select a sample of transactions and perform procedures (vouch, scan, etc.) to verify that the transaction was for an allowable activity.

4) The auditor should be alert for large transfers of funds from program accounts, which may have been used to fund unallowable activities.

Audit Implications (adequacy of the system and controls, and the effect on sample size, significant deficiencies / material weaknesses, and management letter comments)

A. Results of Test of Controls: (including material weaknesses, significant deficiencies and management letter items)

B. Assessment of Control Risk:




C. Effect on the Nature, Timing, and Extent of Compliance (Substantive Test) including Sample Size:

D. Results of Compliance (Substantive Tests) Tests:

E. Questioned Costs: Actual __________ Projected __________



B. Allowable Costs / Cost Principles

Introduction

The following OMB cost principles circulars prescribe the cost accounting policies associated with the administration of

Federal awards by (1) States, local governments, and Indian tribal governments (State rules for expenditures of State funds apply for block grants authorized by the Omnibus Budget Reconciliation Act of 1981 and for other programs specified on Appendix I); (2) institutions of higher education; and (3) non-profit organizations. Federal awards administered by publicly owned hospitals and other providers of medical care are exempt from OMB’s cost principles circulars, but are subject to requirements promulgated by the sponsoring Federal agencies (e.g., the Department of

Health and Human Services’ 45 CFR part 74, Appendix E). The cost principles applicable to a non-Federal entity apply to all Federal awards received by the entity, regardless of whether the awards are received directly from the Federal

Government, or indirectly through a pass-through entity. The circulars describe selected cost items, allowable and unallowable costs, and standard methodologies for calculating indirect costs rates (e.g., methodologies used to recover facilities and administrative costs (F&A) at institutions of higher education). Federal awards include Federal programs and cost-type contracts and may be in the form of grants, contracts, and other agreements.

The three cost principles circulars are as follows:

 OMB Circular A-87 OMB Circular A-87, “Cost Principles for State, Local, and Indian Tribal Governments”

(2 CFR part 225)



 OMB Circular A-21, “Cost Principles for Educational Institutions.” (2 CFR part 220) - All institutions of higher education are subject to the cost principles contained in OMB Circular A-21, which incorporates the four Cost

Accounting Standards Board (CASB) Standards and the Disclosure Statement (DS-2) requirements as described in

OMB Circular A-21, sections C.10 through C.14 and Appendices A and B.

OMB Circular A-122, “Cost Principles for Non-Profit Organizations.” (2 CFR part 230) - Non-profit organizations are subject to OMB Circular A-122, except those non-profit organizations listed in OMB Circular A-122,

Appendix C that are subject to the commercial cost principles contained in the Federal Acquisition Regulation (FAR).

Also, by contract terms and conditions, some non-profit organizations may be subject to the CASB’s Standards and the Disclosure Statement (DS-1) requirements.

Although these cost principles circulars have been reissued in Title 2 of the CFR for ease of access, the OMB Circular A-

133 Compliance Supplement refers to them by the circular title and numbering. However, auditors should use the authoritative reference of 2 CFR Part 225 … when citing noncompliance.

The cost principles articulated in the three OMB cost principles circulars are, in most cases, substantially identical, but a few differences do exist. These differences are necessary because of the nature of the Federal/State/local/non-profit organizational structures, programs administered, and breadth of services offered by some grantees and not others.

Exhibit 1 of Part 3 of the OMB Circular A-133 Compliance Supplement, Selected Items of Cost (included in at the end of

Part B to this FACCR), lists the treatment of the selected cost items in the different circulars.

Note: This FACCR is designed for State and Local Governments (based on the requirements of OMB

Circular A-87). If you are performing a Single Audit for a Higher Educational Institution or a Non-

Profit Organization, you will need to update the guidance contained within this FACCR in accordance with the applicable cost principle circular.

(Source: AOS CFAE)

Important Note: For a cost to be allowable, it must (1) be for a purpose the specific award permits and (2) fall within A-87’s (codified in 2 CFR Part 225) allowable cost guidelines. These two criteria are roughly analogous to classifying a cost by both program/function and object. That is, the grant award generally prescribes the allowable program/function while A-87 prescribes allowable object cost categories and restrictions that may apply to certain object codes of expenditures.




For example, could a government use an imaginary Homeland Security grant to pay OP&F pension costs for its police force? To determine this, the client (and we) would look to the grant agreement to see if police activities (security of persons and property function cost classification) met the program objectives. Then, the auditor would look to A-

87 to determine if pension costs (an object cost classification) are permissible. (A-87, Appendix B states they are allowable, with restrictions, so we would need to determine if the auditee met the restrictions.) Both the client and we should look at A-87 even if the grant agreement includes a budget by object code approved by the grantor agency.

(Source: AOS CFAE)

2 CFR PART 225/OBM Circular A-87

Cost Principles for State, Local, and Indian Tribal Governments

2 CFR part 225/OBM Circular A-87 (A-87) establishes principles and standards for determining allowable direct and indirect for Federal awards. This part is organized in to the following areas of allowable costs: State/Local-Wide Central

Service Costs; State/Local Department or Agency Costs (Direct and Indirect); and State Public Assistance Agency Costs.

Cognizant Agency

A-87, Appendix A, paragraph B.6. defines “cognizant agency” as the Federal agency responsible for reviewing, negotiating, and approving cost allocation plans or indirect cost proposals developed under A-87 on behalf of all Federal agencies. OMB publishes a listing of cognizant agencies ( available at

Federal Register

, 51 FR 552, January 6, 1986). This listing is http://www.whitehouse.gov/sites/default/files/omb/assets/financial_pdf/fr-notice_cost_negotiation_010686.pdf

.

References to cognizant agency in this section should not be confused with the cognizant Federal agency for audit responsibilities, which is defined in OMB Circular A-133, Subpart D. §____.400(a).

Availability of Other Information

Additional information on cost allocation plans and indirect cost rates is found in the Department of Health and Human

Services (HHS) publications:

A Guide for State, Local, and Indian Tribal Governments (ASMB C-10); Review Guide for

State and Local Governments, State/Local-Wide Central Service Cost Allocation Plans, and Indirect Cost Rates;

and the

DCA Best Practices Manual for Reviewing Public Assistance Cost Allocation Plans

which are available at https://rates.psc.gov/fms/dca/pa.html

.



1.

Alternative Fiscal and Administrative Requirements

(LEAs)

This section applies to all ESEA programs in this Supplement: Title I, Part A (84.010); MEP (84.011); CSP (84.282);

21st CCLC (84.287

); Title III, Part A (84.365); MSP (84.366); Title II, Part A (84.367); and SIG (84.377 and

84.388).

A State may adopt its own written fiscal and administrative requirements, which are consistent with the provisions of

OMB Circular A-87, for expending and accounting for all funds received by SEAs and LEAs under ESEA programs. The written fiscal and administrative requirements must (a) be sufficiently specific to ensure that funds are used in compliance with all applicable statutory and regulatory provisions, including ensuring that costs are allocable to a particular cost objective; (b) ensure that funds received are spent only for reasonable and necessary costs of the program; and (c) ensure that funds are not used for general expenses required to carry out other responsibilities of

State or local governments (34 CFR section 299.2(b)).





During Fy 15, ODE developed a new CCIP functionality designed to verify that there is a correct approved restricted indirect cost rate during the budget process. When a budget revision is done, a budget error message will appear if the district’s budget for indirect costs under object code 800 without an approved indirect cost rate, or if the budgeted indirect costs exceed the approved rate.

(Source: ODE CCIP Note https://ccip.ode.state.oh.us/documentlibrary/ViewDocument.aspx?DocumentKey=79206 )

#331 -

Under the authority provided in the statute above, the Ohio Department of Education has developed their own alternative fiscal and administrative requirements, which are included in grey shaded print throughout this FACCR.

Indirect Costs Include:

 Costs originating at the


State or Local-Wide

Treasurer, Auditor (e.g., audit costs, county auditor preparation of SEFA)

Departmental

level, such as: Personnel, Budgeting, Data Center, Accounting,

level, such as: Director/Asst. Director’s Compensation, Secretaries,

Space, Supplies (e.g., Dir.’s compensation for the Community & Economic Dev. Dept.)


(Source: AOS CFAE)

Divisional

level, such as: Director/Asst. Director’s Compensation, Secretaries, Space,

Supplies (e.g., Asst. Dir.’s compensation for the Economic Dev. Division)

Audit Objectives -

State/Local-Wide Central Service Costs

1) Obtain an understanding of internal control over compliance requirements for central service costs, assess risk, and test internal control as required by OMB Circular A-133 §___.500(c).

2) Determine whether the governmental unit complied with the provisions of A-87 (codified in 2 CFR Part 225) as follows: a) Direct charges to Federal awards were for allowable costs. b) Charges to cost pools allocated to Federal awards through central service CAPs were for allowable costs. c) The methods of allocating the costs are in accordance with the applicable cost principles, and produce and equitable and consistent distribution of costs, which benefit from the central service costs being allocated (e.g., cost allocation bases include all activities, including all State departments and agencies and, if appropriate, non-

State organizations which receive services). d) Cost allocations were in accordance with central service CAPs approved by the cognizant agency or, in cases where such plans are not subject to approval, in accordance with the plan on file.

Compliance Requirements -

State/Local-Wide Central Service Costs

State/Local-Wide Cost Allocation Plan (SWCAP/LWCAP)

Most governmental entities provide services, such as accounting, purchasing, computer services, and fringe benefits, to operating agencies on a centralized basis. Since the Federal awards are performed within the individual operating agencies, there must be a process whereby these central service costs are identified and assigned to benefiting operating agency activities on a reasonable and consistent basis. The State/local-wide central service cost allocation plan (CAP) provides that process. (Refer to A-87, Appendix C, State/Local-Wide Central Service Cost Allocation Plans, for additional information and specific requirements.)

The allowable costs of central services that a governmental unit provides to its agencies may be allocated or billed to the user agencies. The State/local-wide central service CAP is the required documentation of the methods used by the governmental unit to identify and accumulate these costs, and to allocate them or develop billing rates based on them.




Allocated central service costs (referred to as Section I costs) are allocated to benefiting operating agencies on some reasonable basis. These costs are usually negotiated and approved for a future year on a “fixed-with-carry-forward” basis. Examples of such services might include general accounting, personnel administration, and purchasing. Section I costs assigned to an operating agency through the State/local-wide central service CAP are typically included in the agency’s indirect cost pool.

Billed central service costs (referred to as Section II costs) are billed to benefiting agencies and/or programs on an individual fee-for-service or similar basis. The billed rates are usually based on the estimated costs for providing the services. An adjustment will be made at least annually for the difference between the revenue generated by each billed service and the actual allowable costs. Examples of such billed services include computer services, transportation services, self- insurance, and fringe benefits. Section II costs billed to an operating agency may be charged as direct costs to the agency’s Federal awards or included in its indirect cost pool.

1. Compliance Requirements – State/Local-Wide Central Service Costs a. Basic Guidelines

(1) The basic guidelines affecting allowability of costs (direct and indirect) are identified in A-87, Appendix A, paragraph C.

(2) To be allowable under Federal awards, costs must meet the following general criteria (A-87, Appendix A, paragraph C.1):

(a) Be necessary and reasonable for the performance and administration of Federal awards. (Refer to A-

87, Appendix A, paragraph C.2 for additional information on reasonableness of costs.)

(b) Be allocable to Federal awards under the provisions of A-87. (Refer to A-87, Appendix A, paragraph

C.3 for additional information on allocable costs.)

(c) Be authorized or not prohibited under State or local laws or regulations.

(d) Conform to any limitations or exclusions set forth in A-87, Federal laws, terms and conditions of the

Federal award, or other governing regulations as to types or amounts of cost items.

(e) Be consistent with policies, regulations, and procedures that apply uniformly to both Federal awards and other activities of the governmental unit.

(f) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.

(g) Be determined in accordance with generally accepted accounting principles, except as otherwise provided in A-87.

(h) Not be included as a cost or used to meet cost sharing or matching requirements of any other

Federal award, except as specifically provided by Federal law or regulation.

(i) Be net of all applicable credits. (Refer to A-87, Appendix A, paragraph C.4 for additional information on applicable credits.)

(j) Be adequately documented.




b. Selected Items of Cost

(1) Sections 1 through 43 of A-87, Appendix B, provide the principles to be applied in establishing the allowability or unallowability of certain items of cost. (For a listing of costs, refer to Exhibit 1 of this part of the Supplement.) These principles apply whether a cost is treated as direct or indirect. Failure to mention a particular item of cost in this section of A-87 is not intended to imply that it is either allowable or unallowable; rather, determination of allowability in each case should be based on the treatment or standards provided for similar or related items of cost.

(2) A cost is allowable for Federal reimbursement only to the extent of benefits received by Federal awards and its conformance with the general policies and principles stated in A-87, Appendix A.

c. Submission Requirements

(1) Submission requirements are identified in A-87, Appendix C, paragraph D.

(2) A State is required to submit a State-wide central service CAP to HHS for each year in which it claims central service costs under Federal awards.

(3) A local government that has been designated as a “major local government” by OMB is required to submit a central service CAP to its cognizant agency annually. This listing is posted on the OMB website

( http://www.whitehouse.gov/omb/management ). All other local governments claiming central service costs must develop a CAP in accordance with the requirements described in A-87 and maintain the plan and related supporting documentation for audit. Local governments are not required to submit the plan for Federal approval unless they are specifically requested to do so by the cognizant agency. If a local government receives funds as a subrecipient only, the primary recipient will be responsible for negotiating and/or monitoring the local government’s plan.

(4) All central service CAPs will be prepared and, when required, submitted within the 6 months prior to the beginning of the governmental unit’s fiscal years in which it proposes to claim central service costs.

Extensions may be granted by the cognizant agency.

d. Documentation Requirements

(1) The central service CAP must include all central service costs that will be claimed (either as an allocated e. or a billed cost) under Federal awards. Costs of central services omitted from the CAP will not be reimbursed.

(2) The documentation requirements for all central service CAPs are contained in A 87, Appendix C, paragraph E. All plans and related documentation used as a basis for claiming costs under Federal awards must be retained for audit in accordance with the record retention requirements contained in the A-102

Common Rule.

Required Certification

– No proposal to establish a central service CAP, whether submitted to a Federal cognizant agency or maintained on file by the governmental unit, shall be accepted and approved unless such costs have been certified by the governmental unit using the Certificate of Cost Allocation Plan as set forth in A-87, Appendix C. f.

Allocated Central Service Costs (Section I Costs)

immediately (A-87, Appendix C, paragraph G.3).

– A carry-forward adjustment is not permitted for a central service activity that was not included in the previously approved plan or for unallowable costs that must be reimbursed

g. Billed Central Service Costs (Section II Costs)

(1) Internal service funds for central service activities are allowed a working capital reserve of up to 60 days



B. Allowable Costs / Cost Principles cash expenses for normal operating purposes (A- 87, Appendix C, paragraph G.2). A working capital reserve exceeding 60 days may be approved by the cognizant Federal agency in exceptional cases.

(2) Adjustments of billed central services are required when there is a difference between the revenue generated by each billed service and the actual allowable costs (A-87, Appendix C, paragraph G.4). The adjustments will be made through one of the following methods:

(a) A cash refund to the Federal Government for the Federal share of the adjustment, if revenue exceeds costs,

(b) Credits to the amounts charged to the individual programs,

(c) Adjustments to future billing rates, or

(d) Adjustments to allocated central service costs (Section I) if the total amount of the adjustment for a particular service does not exceed $500,000.

(3) Whenever funds are transferred from a self-insurance reserve to other accounts (e.g., general fund), refunds shall be made to the Federal Government for its share of funds transferred, including earned or imputed interest from the date of transfer (A-87, Appendix B, paragraph 22).


The requirements for allowable costs/cost principles are contained in the A-102 Common Rule (§___.22), OMB Circular A-

110 (2 CFR section 215.27), program legislation, Federal awarding agency regulations, and the terms and conditions of the award.


- State/Local Department or Agency Costs – Direct and Indirect

1.

Obtain an understanding of internal control over the compliance requirements for State/local department or agency costs, assess risk, and test internal control as required by OMB Circular A-133 §___.500(c).

2.

Determine whether the governmental unit complied with the provisions of A-87 as follows: a) Direct charges to Federal awards were for allowable costs. b) Charges to cost pools used in calculating indirect cost rates were for allowable costs. c) The methods for allocating the costs are in accordance with the applicable cost principles, and produce an d) e) equitable and consistent distribution of costs (e.g., all activities that benefit from the indirect cost, including unallowable activities, must receive an appropriate allocation of indirect costs).

Indirect cost rates were applied in accordance with approved indirect cost rate agreements (ICRA), or special award provisions or limitations, if different from those stated in negotiated rate agreements.

For local departments or agencies that do not have to submit an ICRP to the cognizant Federal agency, indirect cost rates were applied in accordance with the ICRP maintained on file.


– State/Local Department or Agency Costs – Direct and Indirect

In Ohio, the Secretary of the U.S. Department of Education has delegated this authority to the Ohio

Department of Education’s Office of Federal and State Grants Management. All districts recovering indirect costs must have a plan on file with the ODE and an approved indirect cost recovery rate (ICRP). When material indirect costs are charged to a major program, auditors must test the ICRP using the audit procedures below.

When testing the ICRP, auditors should review ODE’s “Indirect Cost Recovery Plan For Ohio School Districts”. This document should be available from the LEA or from ODE’s Office of Federal and State Grants Management.

(Source: AOS CFAE)




The individual State/local departments or agencies (also known as operating agencies) are responsible for the performance or administration of Federal awards. In order to receive cost reimbursement under Federal awards, the department or agency usually submits claims asserting that allowable and eligible costs (direct and indirect) have been incurred in accordance with A-87 (codified in 2 CFR Part 225).

While direct costs are those that can be identified specifically with a particular final cost objective, the indirect costs are those that have been incurred for common or joint purposes, and not readily assignable to the cost objectives specifically benefited without effort disproportionate to the results achieved. Indirect costs are normally charged to Federal awards by the use of an indirect cost rate.

The indirect cost rate proposal (ICRP) provides the documentation prepared by a State/local department or agency, to substantiate its request for the establishment of an indirect cost rate. The indirect costs include (1) costs originating in the department or agency carrying out Federal awards, and (2) costs of central governmental services distributed through the State/local-wide central service CAP that are not otherwise treated as direct costs. The IRCPs are based on the most current financial data and are used to either establish predetermined, fixed, or provisional indirect cost rates or to finalize provisional rates (for rate definitions refer to A-87 (codified in 2 CFR Part 225), Appendix E, paragraph B).

1. General Compliance Requirements – State/Local Department or Agency Costs – Direct and Indirect

a. b.

Basic Guidelines

– Refer to the previous section, “Allowability of Costs – General Criteria (applicable to both direct and indirect costs) – Basic Guidelines,” for the guidelines affecting the allowability of costs

(direct and indirect) under Federal awards.

Selected Items of Cost

– Refer to the previous section, “Allowability of Costs – General Criteria (applicable to both direct and indirect costs) – Selected Items of Cost,” for the principles to establish allowability or unallowability of certain items of cost. These principles apply whether a cost is treated as direct or indirect. c.

Allocation of Indirect Costs and Determination of Indirect Cost Rates

(1) The specific methods for allocating indirect costs and computing indirect cost rates are as follows:

(a)

Simplified Method –

This method is applicable where a governmental unit’s department or agency has only one major function, or where all its major functions benefit from the indirect cost to approximately the same degree. The allocation of indirect costs and the computation of an indirect cost rate may be accomplished through simplified allocation procedures described in the circular (A-87, Appendix E, paragraph C.2).

(b)

Multiple Allocation Base Method –

This method is applicable where a governmental unit’s department or agency has several major functions that benefit from its indirect costs in varying degrees. The allocation of indirect costs may require the accumulation of such costs into separate groupings which are then allocated individually to benefiting functions by means of a base which best measures the relative degree of benefit. (For detailed information, refer to A-87, Appendix E, paragraph C.3.)

(c)

Special Indirect Cost Rates –

In some instances, a single indirect cost rate for all activities of a department or agency may not be appropriate. Different factors may substantially affect the indirect costs applicable to a particular program or group of programs, e.g., the physical location of the work, the nature of the facilities, or level of administrative support required. (For the requirements for a separate indirect cost rate, refer to A-87, Appendix E, paragraph C.4.)

(d)

Cost Allocation Plans –

In certain cases, the cognizant agency may require a State or



B. Allowable Costs / Cost Principles local governmental unit’s department or agency to prepare a CAP instead of an ICRP.

These are infrequently occurring cases in which the nature of the department or agency’s

Federal awards makes impracticable the use of a rate to recover indirect costs. A CAP required in such cases consists of narrative descriptions of the methods the department or agency uses to allocate indirect costs to programs, awards, or other cost objectives.

Like an ICRP, the CAP must be either submitted to the cognizant agency for review, negotiation and approval, or retained on file for inspection during audits. d.

Submission Requirements

(1)

(2)

Submission requirements are identified in A-87, Appendix E, paragraph D.1. All departments or agencies of a governmental unit claiming indirect costs under Federal awards must prepare an

ICRP and related documentation to support those costs.

A State/local department or agency for which a cognizant Federal agency has been assigned by

OMB must submit its ICRP to its cognizant agency. Smaller local government departments or agencies which are not required to submit a proposal to the cognizant Federal agency must develop an ICRP in accordance with the requirements of A-87, and maintain the proposal and related supporting documentation for audit. Where a local government receives funds as a subrecipient only, the primary recipient will be responsible for negotiating and/or monitoring the subrecipient’s plan. e.

(3) Each Indian tribal government desiring reimbursement of indirect costs must submit its ICRP to its cognizant agency, which generally is the Department of the Interior.

(4) ICRPs must be developed (and, when required, submitted) within 6 months after the close of the governmental unit’s fiscal year.

Documentation and Certification Requirements

The documentation and certification requirements for ICRPs are included in A-87, Appendix E, paragraphs

D.2 and 3, respectively. The proposal and related documentation must be retained for audit in accordance with the record retention requirements contained in the A-102 Common Rule.



2.

Indirect Costs

(All grantees/all subgrantees)

ESEA programs in this Supplement to which this section applies are: Title I, Part A (84.010); MEP (84.011); CSP

(84.282); 21st CCLC (84.287

); Title III, Part A (84.365); MSP (84.366); Title II, Part A (84.367); and SIG (84.377 and

84.388).

This section also applies to Adult Education (84.002); IDEA (84.027 and 84.173); CTE (84.048); IDEA, Part C

(84.181); and RTT (84.395).

A “restricted” indirect cost rate (RICR) must be used for programs administered by State and local governments and their governmental subrecipients that have a statutory requirement prohibiting the use of Federal funds to supplant non-federal funds. Non-governmental grantees or subgrantees administering such programs have the option of using the RICR, or an indirect cost rate of 8 percent, unless ED determines that the RICR would be lower.

The formula for a restricted indirect cost rate is:

RICR = (General management costs + Fixed costs) / (Other expenditures)




General management costs are costs of activities that are for the direction and control of the grantee’s (or subgrantee’s) affairs that are organization wide, such as central accounting services, payroll preparation and personnel management. For State and local governments, the general management indirect costs consist of (1) allocated Statewide Central Service Costs approved by the Department of Health and Human Services in a formal

Statewide Cost Allocation Plan (SWCAP) as “Section I” costs and (2) departmental indirect costs. The term “general management” as it applies to departmental indirect costs does not include expenditures limited to one component or operation of the grantee. Specifically excluded from general management costs are the following costs that are reclassified and included in the “other expenditures” denominator:

(a) Divisional administration that is limited to one component of the grantee;

(b) The governing body of the grantee;

(c) Compensation of the chief executive officer of the grantee;

(d) Compensation of the chief executive officer of any component of the grantee; and

(e) Operation of the immediate offices of these officers.

Also excluded from the SWCAP Section I indirect costs are any occupancy and maintenance type costs as described in

34 CFR section 76.568. However, because these costs are allocated and not incurred at the departmental level, they do not require reclassification to the “other expenditure” denominator.

Fixed costs are contributions to fringe benefits and similar costs associated with salaries and wages that are charged as indirect costs, including retirement, social security, pension, unemployment compensation and insurance costs.

Other expenditures are the grantee’s total expenditures for its federally and non-federally funded activities, including directly charged occupancy and space maintenance costs (as defined in 34 CFR section 76.568), and the costs related to the chief executive officer of the grantee or any component of the grantee and its offices. Excluded are general management costs, fixed costs, subgrants, capital outlays, debt service, fines and penalties, contingencies, and election expenses (except for elections required by Federal statute).

Occupancy and space maintenance costs associated with functions that are not organization-wide must be included with other expenditures in the indirect cost formula. These costs may be charged directly to affected programs only to the extent that statutory supplanting prohibitions are not violated. This reimbursement must be approved in advance by ED. Specific occupancy and space maintenance costs may be charged directly only to programs affected by the restricted rate calculation if charging for such costs is approved in advance by ED (34 CFR section 76.568(c)).

Indirect costs charged to a grant are determined by applying the RICR to total direct costs of the grant minus capital outlays, subgrants, and other distorting or unallowable items as specified in the grantee’s indirect cost rate agreement.

The other ED programs (those not having a statutory non-supplant requirement) that allow indirect costs do not require a restricted rate and should follow the applicable OMB cost principles circular (34 CFR sections 76.560 and

76.563-76.569). However, all programs awarded from USDE to ODE use the restricted rate because every program has supplement not supplant in the assurances.

3. Unallowable Direct Costs to Programs

Officials from ED have noted that some entities have charged costs in the following areas which were determined to be unallowable as specified in the indicated references. Auditors should be alert that if any such costs are charged, charges must be consistent with provisions of OMB Circular A-87. a. Separation leave costs (OMB Circular A-87, Attachment B, paragraph 8.d.(3)). b. Severance costs (OMB Circular A-87, Attachment B, paragraph 8.g.(3)). c.

Post-retirement health benefit (PRHB) costs (OMB Circular A-87, Attachment B, paragraph 8.f).




4. Unallowable Costs to Programs (Direct or Indirect)

Officials from ED have noted that, in cases where grantees rent or lease buildings or equipment from an affiliate organization, the costs associated with the lease or rental agreement can be excessive. The auditor should be alert to the fact that the measure of allowability in such “less-than-arms-length-relationships” is not fair market value, but rather the “costs of ownership” standard as referenced in each OMB cost principles circular as follows: a. OMB Circular A-87 (2 CFR part 225), Attachment B, paragraph 37.c. b. OMB Circular A-21 (2 CFR part 220), Section J.43. c. OMB Circular A-122 (2 CFR part 230), Attachment B, Paragraph 43.c.


The CCIP is a district level budgeting, planning and approval process. Therefore, LEA’s are aggregating the uses of the various federal programs in the buildings up to the district level. The ODE approves all activities to be conducted by the

LEA via the CCIP. In many cases, the budgeted expenditures reflected on the CCIP are at the district-wide-level; however, equal opportunities exist LEA’s to be expending on behalf of individual buildings.

Additional OMB Guidance for Documentation of Employee Time and Effort ( Consolidated Administrative

Funds and Schoolwide Programs )

Note: Time & Effort / Semi-Annual certification is an A-87 (2 CFR 225) requirement. If A-87 applies to the program, then time & effort/semi-annual certification applies. This is not limited to only Education programs. However, the US Dept. of Education Cross-Cutting Requirements immediately below are

ADDITIONAL T&E information for certain programs with regards to their Consolidated Administrative

Funds or Schoolwide Programs.


Documentation of Employee Time and Effort ( Consolidated Administrative Funds and Schoolwide

Programs )

ESEA programs in this Supplement to which this section applies are: Title I, Part A (84.010); CSP (84.282); 21st CCLC

(84.287

); Title III, Part A (84.365); MSP (84.366) (with respect to schoolwide programs and consolidation of administrative funds at the LEA level); Title II, Part A (84.367); and SIG (84.377 and 84.388).

This section also applies to IDEA (84.027 and 84.173) (schoolwide programs only) and CTE (84.048) (schoolwide programs only)

. a.

Consolidated Administrative Funds:

An SEA or LEA that consolidates Federal administrative funds under

Sections 9201 or 9203 of ESEA (20 USC 7821 or 7823) is not required to keep separate records by individual program. The SEA or LEA may treat the consolidated administrative cost objective as a “dedicated function.”

Time-and-effort requirements with respect to consolidated administrative funds vary under different circumstances.

(1) An employee who works solely on a single cost objective (i.e., the consolidated administrative cost objective) must furnish a semi-annual certification that he/she has been engaged solely in activities that support the single cost objective. The certification must be signed by the employee or a supervisory official having first-hand knowledge of the work performed by the employee in accordance with OMB

Circular A-87, Attachment B, paragraph 8.h.(3).

(2) An employee who works in part on a single cost objective (i.e., the consolidated administrative cost



B. Allowable Costs / Cost Principles objective) and in part on a Federal program whose administrative funds have not been consolidated or on activities funded from other revenue sources must maintain time and effort distribution records in accordance with OMB Circular A-87, Attachment B, paragraphs 8.h.(4), (5), and (6) documenting the portion of time and effort dedicated to:

(a) The single cost objective, and

(b) Each program or other cost objective supported by non-consolidated Federal funds or other revenue sources. b.

Schoolwide Programs –

A schoolwide program school is permitted to consolidate Federal funds with State and local funds to upgrade the entire educational program of the school. A school that consolidates Federal funds with State and local funds in a consolidated schoolwide pool is not required to maintain separate records by program (Section 1114(a)(3)(C) of ESEA (20 USC 6314(a)(3)(C)); 34 CFR section 200.29(d)). If a schoolwide program school does not consolidate Federal funds in a consolidated schoolwide pool, the school must keep separate records by program. (Guidance is contained in the publication entitled

Title I Fiscal Issues:

Maintenance of Effort; Comparability; Supplement, not Supplant; Carryover; Consolidating Funds in Schoolwide

Programs; and Grantback Requirements

(February 2008). This guidance is available at http://www.ed.gov/programs/titleiparta/fiscalguid.doc

.)

Time-and-effort requirements in schoolwide program schools vary under different circumstances.

(1) If a school operating a schoolwide program consolidates Federal, State, and local funds in a consolidated schoolwide pool, an employee who is paid in full with funds from that pool is not required to file a semiannual certification because there is no distinction between staff paid with Federal funds and staff paid with State or local funds. In effect, payment from the single consolidated schoolwide pool certifies that the employee works only on activities of the schoolwide program.

(2) If a school operating a schoolwide program does not consolidate Federal funds with State and local funds in a consolidated schoolwide pool, an employee who works, in whole or in part, on a Federal program or cost objective must document time and effort as follows:

(a) An employee who works solely on a single cost objective (e.g., a single Federal program whose funds have not been consolidated or Federal programs whose funds have been consolidated but not with State and local funds) must furnish a semi-annual certification that he/she has been engaged solely in activities that support the single cost objective. The certification must be signed by the employee or a supervisory official having first-hand knowledge of the work performed by the employee in accordance with OMB Circular A-87, Attachment B, paragraph

8.h.(3).

(b) An employee who works on multiple activities or cost objectives (e.g., in part on a Federal program whose funds have not been consolidated in a consolidated schoolwide pool and in part on Federal programs supported with funds consolidated in a schoolwide pool or on activities that are not part of the same cost objective) must maintain time and effort distribution records in accordance with OMB Circular A-87, Attachment B, paragraph 8.h.(4), (5), and (6). The employee must document the portion of time and effort dedicated to:

(i) The Federal program or cost objective; and

(ii) Each other program or cost objective supported by consolidated Federal funds or other revenue sources. c. In a September 7, 2012 letter to Chief State School Officers, ED authorized SEAs to approve LEAs’ use of a substitute system for time-and-effort reporting for employees whose salaries are supported by multiple cost



B. Allowable Costs / Cost Principles objectives, but who work on a predetermined schedule. ED also provided guidance to clarify the meaning of a

“single cost objective” under OMB Circular A-87, Attachment B, paragraph 8.h.(3). For more detail, see

Letter to Chief State School Officers on Granting Administrative Flexibility for Better Measures of Success

(Sept. 7,

2012) ( http://www2.ed.gov/policy/fund/guid/gposbul/time-and-effort-reporting.html?exp=3 ).


NOTE: ODE approved a substitute system of time-and-effort reporting in their memo dated 3/17/2014.

 Semi-annual certifications are allowed when an employee’s compensation is funded by only one federal grant. An employee funded by a federal grant and the general fund would fall under this category. o These certifications will be prepared at least semi-annually and will be signed by the employee or supervisory official having first-hand knowledge of the work performed by the employee.

 Time and effort documentation (Personal Activity Reports – PAR) is used when an employee’s compensation is funded by more than one federal grant, and must meet the following standards: o They must reflect an after-the-fact distribution of the actual activity of each employee o They must account for the total activity for which each employee is compensated o They must be prepared at least monthly and must coincide with one or more pay periods o They must be signed by the employee

 The substitute system of collecting time and effort is used when an employee’s compensation is funded by more than one federal grant – see guidelines below.

An educational entity (districts, community schools, ESC, etc.) may submit to ODE proposed substitute time-and-effort documentation for review and approval.

Once the educational entity’s substitute system of time-and-effort documentation has been approved, the Time-and-Effort Substitute System Certification and employee schedule would need to be completed on a yearly basis. The employee schedule would be completed prior to the start of the school year, and the certification is to be completed at the end of the year. The substitute documentation must include the components listed below in section B. If an educational entity cannot or elects not to use substitute time-and-effort documentation, the educational entity must adhere to the original requirements of 2 C.F.R. Part 225.

Guidelines for using a substitute system for tracking time-and-effort

 The educational entity will certify (see the template in section D) that: o only eligible employees will participate in the substitute system (see #2 below) o the system used to document employee work schedules includes sufficient controls to ensure that the schedules are accurate o the certification includes full disclosure of any known deficiencies with the substitute system and/or known challenges with the implementation of the substitute system

 The employees utilizing the substitute system must work on specific activities or cost objectives based on a predetermined schedule (see cost objective definition in section A and examples of single cost objective in section

F).

 The employee does not work on multiple activities or cost objectives at the exact same time. An educational entity may use established work schedules (section D) for their eligible employees to support the distribution of the employees’ compensation (see example in sections F and G).

 The work schedules must meet ALL of the following criteria: o Indicate the specific activity or cost objective that the employee worked on for each segment of the employee’s schedule



B. Allowable Costs / Cost Principles o Account for the total hours for which each employee is compensated during the period reflected on the employee’s schedule o Be certified annually and signed by the employee or a supervisory official having first-hand knowledge of the work performed by the employee

If an employee’s established schedule is modified, or if the employee deviates from the established schedule, the  following additional documentation must be prepared: o Any revisions to an employee’s established schedule that continues for a prolonged period must be documented and certified in accordance with the requirements in #3 above. The effective dates of any changes must be clearly indicated on the documentation provided.

 Any significant deviations from an employee’s established schedule that require the employee to work on multiple activities or cost objectives at the exact same time, including but not limited to lengthy, unanticipated schedule changes, must be documented by the employee using a personnel activity report that covers the period during which the deviations occurred. A significant deviation from an employee’s established schedule that would warrant an individual reverting to a personnel activity report is defined as working more than one month on the deviated schedule, newly responsible for additional duties, etc.

Examples of the following documentation are available in Section D of the ODE memo:

 Time-and-effort substitute system certification

 Acceptable employee schedule

(Source: http://education.ohio.gov/Topics/Finance-and-Funding/Grants/Grants-Management-Online-Forms )

NOTE: Per ODE Office of Grants Management, the substitute system of T&E reporting is effective for Fy 14, even though the memo was not dated until 3/17/2014. The schools could submit their process/policy along with the teachers schedules from the beginning of Fy 14 for approval; and then in June 2014 have the certifications signed that the work performed was consistent with the approved schedule.

AOS Employees – Please refer to memo titled “School District

Findings and Questioned Costs

Related to Time & Effort

Documentation”, issued 1/11/12, for guidance on whether to report questioned costs for certain situations. If you need this memo, it may be requested by opening a ticket in Spiceworks and selecting “FACCR” as the specialty.


Though not common, some programs or pass-through entities impose specific additional requirements or restrict the application of certain practices generally permitted by A-87. Document any material requirements here.

In addition, many pass-through entities prohibit indirect costs or require local government to have ICRPs approved prior to charging indirect costs to the program. Document any such requirements here.

The grant application, agreement, or policies may contain the specific requirements for allowable costs/cost principles.

(Source: )






), perform procedures to obtain an understanding of internal control sufficient to plan the audit to support a low assessed level of control risk for the program. Plan the testing of internal control to support a low assessed level of control risk for Allowable Costs / Cost Principles and perform the testing of internal control as planned. If internal control over some or all of the compliance requirements is likely to be ineffective,



B. Allowable Costs / Cost Principles see the alternative procedures in §___.500(c)(3) of OMB Circular A-133, including assessing the control risk at the maximum and considering whether additional compliance tests and reporting are required because of ineffective internal control. For further AOS guidance on testing federal controls see http://portal/BP/Intranet/AA%20Training%20Fall%202011/FACCR%20Controls%20and%20Federal%20Update.pdf

– Fall

2011.

What control procedures address the compliance requirement? WP Ref.





Suggested Audit Procedures – Compliance (Substantive Tests) WP Ref.

Suggested Compliance Audit Procedures – State/Local-Wide Central Service Costs

a. Consider the results of the testing of internal control in assessing the risk of noncompliance. Use this as the basis for determining the nature, timing, and extent (e.g., number of transactions to be selected) of substantive tests of compliance.

(1) In reviewing the State/local-wide central service costs, the auditor may not need to test all central service costs (allocated or billed) every year; for example, the auditor in obtaining sufficient evidence for the opinion may consider testing each central service at least every 5 years, and perform additional testing for central services with operating budgets of $5 million or more.

(2) If the local governmental entity is not required to submit the central service CAP and related supporting documentation, the auditor should consider the risk of the reduced level of oversight in designing the nature, timing and extent of compliance testing. b.

General Audit Procedures for State/Local-Wide Central Service CAPs

– The following procedures apply to direct charges to Federal awards as well as charges to cost pools that are allocated wholly or partially to Federal awards or used in formulating indirect cost rates used for recovering indirect costs under Federal awards.

(1) Test a sample of transactions for conformance with:

(a) The criteria contained in the “Basic Guidelines” section of A-87, Appendix A, paragraph C.

Scan documented program expenditures and determine that the district did not charge indirect cost recovery to the grant when a proposal was not approved by ODE.

(b) The principles to establish allowability or unallowability of certain items of cost (A-87,

Appendix B).

(2) If the auditor identifies unallowable costs, the auditor should be aware that directly associated costs might have been charged. Directly associated costs are costs incurred solely as a result of incurring another cost, and would have not been incurred if the other cost had not been incurred. When an unallowable cost is incurred, directly associated costs are also unallowable.

For example, occupancy costs related to unallowable general costs of government are also unallowable.




c. Special Audit Procedures for State/Local-Wide Central Service CAPs

(1) Verify that the central service CAP includes the required documentation in accordance with A-

87, Appendix C, paragraph E.

(2)

Testing of the State/Local-Wide Central Service CAPs – Allocated Section I Costs

(a) If new allocated central service costs were added, review the justification for including the item as Section I costs to ascertain if the costs are allowable (e.g., if costs benefit Federal awards).

(b) Identify the central service costs that incurred a significant increase in actual costs from the prior year’s costs. Test a sample of transactions to verify the allowability of the costs.

(c) Determine whether the bases used to allocate costs are appropriate, i.e., costs are allocated in accordance with relative benefits received.

(d) Determine whether the proposed bases include all activities that benefit from the central service costs being allocated, including all users that receive the services. For example, the State-wide central service CAP should allocate costs to all benefiting State departments and agencies, and, where appropriate, non-State organizations, such as local government agencies.

(e) Perform an analysis of the allocation bases by selecting agencies with significant Federal awards to determine if the percentage of costs allocated to these agencies has increased from the prior year. For those selected agencies with significant allocation percentage increases, determine that the data included in the bases are current and accurate.

(f) Verify that carry-forward adjustments are properly computed in accordance with A-87,

Appendix C, paragraph G.3.

(3)

Testing of the State/Local-Wide Central Service CAPs – Billed Section II Costs

(a) For billed central service activities accounted for in separate funds (e.g., internal service funds), ascertain if:

(i) Retained earnings/fund balances (including reserves) are computed in accordance with the applicable cost principles;

(ii) Working capital reserves are not excessive in amount (generally not greater than 60 days for cash expenses for normal operations incurred for the period exclusive of depreciation, capital costs, and debt principal costs); and

(iii) Adjustments were made when there is a difference between the revenue generated by each billed service and the actual allowable costs.

Note: A 60-day working capital reserve is not automatic. Refer to the HHS publication,

Guide for State, Local, and Indian Tribal Governments (ASMB C-10)

for guidelines.

A

(b) Test to ensure that all users of services are billed in a consistent manner. For example, examine selected billings to determine if all users (including users outside the governmental unit) are charged the same rate for the same service.




(c) Test that billing rates exclude unallowable costs, in accordance with applicable cost principles and Federal statutes.

(d) Test, where billed central service activities are funded through general revenue appropriations, that the billing rates (or charges) are developed based on actual costs and were adjusted to eliminate profits.

(e) For self-insurance and pension funds, ascertain if independent actuarial studies appropriate for such activities are performed at least biennially and that current period costs were allocated based on an appropriate study that is not over 2 years old.

(f) Determine if refunds were made to the Federal Government for its share of funds transferred from the self-insurance reserve to other accounts, including imputed or earned interest from the date of the transfer.

Suggested Compliance Audit Procedures – State/Local Department or Agency Costs –

Direct and Indirect

a. Consider the results of the testing of internal control in assessing the risk of noncompliance. Use this as the basis for determining the nature, timing, and extent (e.g., number of transactions to be selected) of substantive tests of compliance. If the local department or agency is not required to submit an ICRP and related supporting documentation, the auditor should consider the risk of the reduced level of oversight in designing the nature, timing, and extent of compliance testing. b. General Audit Procedures ( Direct and Indirect Costs ) – The following procedures apply to direct charges to Federal awards as well as charges to cost pools that are allocated wholly or partially to

Federal awards or used in formulating indirect cost rates used for recovering indirect costs from

Federal awards.

(1) Test a sample of transactions for conformance with:

(a) The criteria contained in the “Basic Guidelines” section of A-87, Appendix A, paragraph C.

Scan documented program expenditures and determine that the district did not charge indirect cost recovery to the grant when a proposal was not approved by ODE. http://www.gpo.gov/fdsys/pkg/CFR-2012-title2-vol1/pdf/CFR-2012-title2-vol1-part225appA.pdf

(b) The principles to establish allowability or unallowability of certain items of cost (A-87,

Appendix B). http://www.gpo.gov/fdsys/pkg/CFR-2012-title2-vol1/pdf/CFR-2012-title2-vol1-part225appB.pdf

Note: While several items are included in A-87 (2 CFR 225) Appendix B, one item to note is Time & Effort / Semi-Annual certification (paragraph 8h). If

A-87 applies to the program, then time & effort/semi-annual certification

applies. This is not limited to only Education programs.

(2) If the auditor identifies unallowable costs, the auditor should be aware that directly associated costs might have been charged. Directly associated costs are costs incurred solely as a result of incurring another cost, and would have not been incurred if the other cost had not been incurred.

When an unallowable cost is incurred, directly associated costs are also unallowable. For example, occupancy costs related to unallowable general costs of government are also unallowable.

c. Special Audit Procedures for State/Local Department or Agency ICRPs




(1) Verify that the ICRP includes the required documentation in accordance with A-87, Appendix E, paragraph D.

(2)

Testing of the ICRP

– There may be a timing consideration when the audit is completed before the ICRP is completed. In this instance, the auditor should consider performing interim testing of the costs charged to the cost pools and the allocation bases (e.g., determine from management the cost pools that management expects to include in the ICRP and test the costs for compliance with A-87). Should there be audit exceptions, corrective action may be taken earlier to minimize questioned costs. In the next year’s audit, the auditor should complete testing and verify management’s representations against the completed ICRP.

(a) When the ICRA is the basis for indirect cost charged to a major program, the auditor is required to obtain appropriate assurance that the costs collected in the cost pools and allocation methods are in compliance with the applicable cost principles. The following procedures are some acceptable options the auditor may use to obtain this assurance:

(i)

Indirect Cost Pool

– Test the indirect cost pool to ascertain if it includes only allowable costs in accordance with A-87.

(A) Test to ensure that unallowable costs are identified and eliminated from the indirect cost pool (e.g., capital expenditures, general costs of government).

(B) Identify significant changes in expense categories between the prior ICRP and the current ICRP. Test a sample of transactions to verify the allowability of the costs.

(C) Trace the central service costs that are included in the indirect cost pool to the approved State/local-wide central service CAP or to plans on file when submission is not required.

(ii)

Direct Cost Base

costs.

– Test the methods of allocating the costs to ascertain if they are in accordance with the applicable provisions of A-87 and produce an equitable distribution of

(A) Determine that the proposed base(s) includes all activities that benefit from the indirect costs being allocated.

(B) If the direct cost base is not limited to direct salaries and wages, determine that distorting items are excluded from the base. Examples of distorting items include capital expenditures, flow-through funds (such as benefit payments), and subaward costs in excess of $25,000 per subaward.

(C) Determine the appropriateness of the allocation base (e.g., salaries and wages, modified total direct costs).

(iii)

Other Procedures

(A) Examine the employee time report system results (where and if used) to ascertain if they are accurate, and are based on the actual effort devoted to the various functional and programmatic activities to which the salary and wage costs are charged.

(Refer to A-87, Appendix B, paragraph 8.h for additional information on support of salaries and wages - http://www.gpo.gov/fdsys/pkg/CFR-2012-title2-vol1/pdf/CFR-

2012-title2-vol1-part225-appB.pdf

pg. 5/15

.)




(B) For an ICRP using the multiple allocation base method, test statistical data (e.g., square footage, audit hours, salaries and wages) to ascertain if the proposed allocation or rate bases are reasonable, updated as necessary, and do not contain any material omissions.

(3)

Testing of Charges Based Upon the ICRA

– Perform the following procedures to test the application of charges to Federal awards based upon an ICRA:

(a) Obtain and read the current ICRA and determine the terms in effect.

(b) Select a sample of claims for reimbursement and verify that the rates used are in accordance with the rate agreement, that rates were applied to the appropriate bases, and that the amounts claimed were the product of applying the rate to the applicable base. Verify that the costs included in the base(s) are consistent with the costs that were included in the base year (e.g., if the allocation base is total direct costs, verify that current-year direct costs do not include costs items that were treated as indirect costs in the base year).

(4)

Other Procedures

– No Negotiated ICRA

(a) If an indirect cost rate has not been negotiated by a cognizant Federal agency, as required, the auditor should determine whether documentation exists to support the costs. Where the auditee has documentation, the suggested general audit procedures (direct and indirect costs under paragraph 4.b of this section) should be performed to determine the appropriateness of the indirect cost charges to awards.

(b) If an indirect cost rate has not been negotiated by a cognizant agency, as required, and documentation to support the indirect costs does not exist, the auditor should question the costs based on a lack of supporting documentation.









ICRP (Testing of the Program)

The ICRP is based upon costs charged to cost pools representing costs of a base year. The base year often precedes the year in which the ICRP is prepared and the year the resulting Indirect Cost Rate Agreement (IDCRA) is used to charge indirect costs. For example, a non-federal entity may submit an ICRP in January 2004, based upon costs incurred and charged to cost pools during fiscal year ending June 30, 2003 (2003), the base year. The resulting IDCRA negotiated during year ending June 30, 2004 (2004) would be used as the basis for charging indirect costs to federal awards in the year ended June 30, 2005 (2005). For this example, the term IDCRA will also include an ICRP which is not required to be submitted to the federal agency for indirect cost negotiation but is retained on file is first used to charge indirect costs to federal awards the same as an approved plan resulting in an IDCRA.

An audit timing consideration is that the audit for 2003 (which covers the applicable cost pools) may be completed before the ICRP is submitted. Therefore, as part of the audit, the auditor cannot complete testing of the ICRP. Also, if the auditor waits to test the ICRP until 2005 (the year when this ICRP is first used to charge federal awards), the auditor would be testing 2003 records which would then be two years old.

Continuing this example, when the IDCRA is the basis of material charges to a major program in 2005, the auditor for

2005 is require to obtain appropriate assurance that the costs collected in the cost pools and allocation methods are in compliance with A-87 (codified in 2 CFR Part 225) cost principles. The following are some acceptable options the auditor may use to obtain this assurance.

 Perform interim testing of the costs charged to cost pools (e.g., determine from management the cost pools that management expects to include the ICRP and test the costs charged to those pools for compliance with the cost principles of Circular A-87 during the 2003 audit. As part of the 2004 audit, complete testing and verify management’s representation against the ICRP finally submitted in 2004.

 Test costs charged to the cost pools underlying the ICRP during the audit of 2004, the year immediately following the base year. This would require testing of 2003 transactions.

 Wait until 2005, the year in which charges from the IDCRA are material to a major program and test costs charged to cost pools (2003) used to prepare the ICRP. This is a much more difficult approach because it requires going back two years to audit the cost charged to cost pools of the base year.

Advantages of the first two methods are that the testing of the costs charged to the cost pools occurs closer to the time when the transactions occur (which makes audit exceptions easier to resolve). When material indirect costs are charged to any Type A program (determined in accordance with Circular A-133), auditors are strongly encouraged to use one of the first two methods. This is because under the risk-based approach, described in OMB Circular A-133, all Type A programs are required to be considered major programs at least in every three years and the IDCRA is usually used to charge federal awards for at least three years.

When the government submits an IDCRA, the government provides written assurance to the federal government that the plan includes only allowable costs. Accordingly, any material unallowable costs reflected in the ICRP should be reported as an audit finding in the year in which they are first found by audit.

An ICRP may result in an IDCRA that covers one year, but most often results in a multi-year IDCRA. When an ICRP has been tested in an prior year and this testing provides the auditor appropriate audit assurance, in subsequent years the auditor is only required to perform tests to ascertain if there have been material changes to the cost accounting practices and, if so, that the federal cognizant agency for indirect cost negotiation has been informed.

The auditor should take appropriate steps to coordinate testing of costs charges to cost pools supporting an ICRP with the client and, as appropriate, with the federal cognizant agency for indirect cost negotiation.

The auditor should consult with the client in the base year and the year in which the ICRP is submitted to determine the best (e.g., most efficient) alternative under the circumstances.



LIST OF SELECTED ITEMS OF COST CONTAINED IN OMB COST PRINCIPLES CIRCULAR A-87 (codified in 2

CFR Part 225)

(Effective August 31, 2005)

The following exhibit provides an updated listing of selected items of cost contained in 2 CFR part 225 based on the changes contained in the

Federal Register

notice dated August 31, 2005. This is available at the following link: http://www.whitehouse.gov/omb/fedreg/2005/083105_a87.pdf.

The exhibit lists the selected items of cost along with a cursory description of their allowability. The numbers in parentheses refer to the cost item in Appendix B of 2 CFR part 225. The reader is strongly cautioned not to rely exclusively on the summary but to place primary reliance on the referenced circular text. There are also cost items listed auditors may identify in the testing that are not specifically addressed in the CFR.

Advisory councils

Alcoholic beverages

Alumni/ae activities

Selected Cost Item

Advertising and public relations costs

Audit costs and related services

Selected Items of Cost

Exhibit 1 (amended 8/05)

OMB Circular A-87 (codified in 2 CFR Part 225), Appendix

B

State, Local, & Indian Tribal Governments

(1) – Allowable with restrictions


(3) – Unallowable

Not specifically addressed

(4) – Allowable with restrictions and as addressed in

OMB Circular A-133

(5) – Unallowable Bad debts

Bonding costs

Commencement and convocation costs

Communication costs

Compensation for personal services

Compensation for personal services – organization furnished automobile



(7) – Allowable

(8)(g) – Unique criteria for support


Compensation for personal services - sabbatical leave costs Not specifically addressed

Compensation for personal services - severance pay (8)-Allowable with restrictions

Contingency provisions

Deans of faculty and graduate schools

Defense and prosecution of criminal and civil proceedings

(9) – Unallowable with exceptions

Not addressed

(10) – Allowable with restrictions and claims

Depreciation and use allowances

Donations and contributions

Employee morale, health, and welfare costs

Entertainment costs

Equipment and other capital expenditures

Fines and penalties

Fundraising and investment management costs

Gains and losses on depreciable assets

(11) – Allowable with qualifications

(12) – Unallowable (made by recipient); not reimbursable but value may be used as cost sharing or matching (made to recipient)


(14) – Unallowable

(15) – Allowability based on specific requirements

(16) – Unallowable with exception

(17) – Unallowable with restriction

(18) – Allowable with restrictions (Gains and losses on disposition of depreciable property and other capital assets and substantial relocation of Federal programs)

General government expenses

Goods or services for personal use

Housing and personal living expenses

Idle facilities and idle capacity


(20) – Unallowable


(21) – Idle facilities - unallowable with exceptions; idle capacity - allowable with restrictions



Insurance and indemnification

Interest

Interest - substantial relocation

Labor Relations Costs





Lobbying

Lobbying - executive lobbying costs

Losses on other sponsored agreements or contracts

Maintenance, operations and repairs

(24)-Unallowable

(24.b.) – Unallowable


(25) – Allowable with restrictions (Maintenance, operations, and repairs)



Materials and supplies costs

Meetings and conferences

Memberships, subscriptions, and professional activity costs (28) – Allowable as a direct cost for civic, community and social organizations with Federal approval; unallowable for lobbying organizations

Organization costs

Page charges in professional journals

Participant support costs

Patent costs

Plant and homeland security costs

Pre-award costs

Professional services costs

Proposal costs

Publication and printing costs

Rearrangement and alteration costs


(34.b)-Allowable with restrictions (addressed under

“Publication and printing costs”)




(31) – Allowable with restrictions (Pre-award costs)




(35) – Allowable (ordinary and normal); Allowable with

Reconversion costs

Recruiting costs

Federal prior approval (special)


(1.c(1)) – Allowable with restrictions (addresses costs of advertising only)

Relocation costs

Rental cost of buildings and equipment

Royalties and other costs for use of patents

Scholarships and student aid costs

Selling and marketing costs

Specialized service facilities

Student activity costs

Taxes

Termination costs applicable to sponsored agreements

Training costs

Transportation costs

Travel costs

Trustees










(42) – Allowable for employee development






C. Cash Management



§___.500(c).

2) Determine whether for advance payments the recipient/subrecipient followed procedures to minimize the time elapsing between the transfer of funds from the U.S. Treasury, or pass-through entity, and their disbursement.

3) Determine whether the pass-through entity implemented procedures to ensure that advance payments to subrecipients conformed substantially to the same timing requirements that apply to the pass-through entity.

4) Determine whether interest earned on advances was reported/remitted as required.

5) Determine whether an entity has awards funded on a reimbursement payment basis and, if so, whether program costs are paid for with entity funds before reimbursement is requested from the Federal Government.


General

When awards provide for advance payments, recipient must follow procedures to minimize the time elapsing between the transfer of funds from the U.S. Treasury and disbursement and establish similar procedures for subrecipients. Passthrough entities must establish reasonable procedures to ensure receipt of reports on subrecipients’ cash balances and cash disbursements in sufficient time to enable the pass-through entities to submit complete and accurate cash transactions reports to the Federal awarding agency or pass-through entity. Pass-through entities must monitor cash drawdowns by their subrecipients to ensure that subrecipients conform substantially to the same standards of timing and amount as apply to the pass-through entity.

U.S. department of the Treasury (Treasury) regulations at 31 CFR part 205, which implement the Cash Management

Improvement Act of 1990 (CMIA), as amended (Pub. L. 101-453; 31 USC 6501

et seq.

), require State recipients to enter into agreements that prescribe specific methods of drawing down Federal funds (funding techniques) for selected large programs. The agreements also specify the terms and conditions under which an interest liability would be incurred.

Programs not covered by a Treasury-State Agreement are subject to procedures prescribed by Treasury is Subpart B of

31 CFR part 205 (Subpart B).

Except for interest earned on advances of funds exempt under the Intergovernmental Cooperation Act (31 USC 6501

et seq

.) and the Indian Self-Determination Act (23 USC 450), interest earned by local government and Indian tribal government grantees and subgrantees on advances is required to be submitted promptly, but at least quarterly, to the

Federal agency. Up to $100 per year may be kept for administrative expenses.

Interest earned by non-State non-profit entities on Federal fund balances in excess of $250, regardless of the funding agency, is required to be remitted to

Department of Health and Human Services, Payment Management System, P.O. Box 6021, Rockville, MD 20852.

When entities are funded on a reimbursement basis, program costs must be paid for by entity funds before reimbursement is requested from the Federal Government.

Note: Violations of cash management rules

alone

generally should not result in a questioned cost unless the entity spent the interest earnings related to the excess grant cash balances on hand throughout the year (these monies would be payable back to the pass-through/federal agency). Further, the interest earnings expended must exceed $10,000 in a single major program to be a questioned cost. (Source: AOS CFAE)


The requirements for cash management are contained in the A-102 Common Rule (§___.21), OMB Circular A-110 (2 CFR section 215.22), Treasury regulations at 31 CFR part 205, program legislation, Federal awarding agency regulations, and the terms and conditions of the award.

Availability of Other Information




Treasury’s Bureau of the Fiscal Service maintains a Cash Management Improvement Act web page

( http://www.fms.treas.gov/cmia/ ).



34 CFR 80.21 (c) states grantees and subgrantees shall be paid in advance, provided they maintain or demonstrate the willingness and ability to maintain procedures to minimize the time elapsing between the transfer of the funds and their disbursement by the grantee or subgrantee. 34 CFR 80.20(b) states the financial management systems of other grantees and subgrantees must meet the following standards: (7) Procedures for minimizing the time elapsing between the transfer of funds from the U.S. Treasury and disbursement by grantees and subgrantees must be followed whenever advance payment procedures are used…… When advances are made by letter ‐ of ‐ credit or electronic transfer of funds methods, the grantee must make drawdowns as close as possible to the time of making disbursements. Grantees must monitor cash drawdowns by their subgrantees to assure that they conform substantially to the same standards of timing and amount as apply to advances to the grantees.

Ohio Department of Education CCIP Note #284 states all cash requests must be compliant with the provisions of the Cash Management Improvement Act (34 CFR 80.21). To receive approval consideration, cash requests must be made

for immediate needs for the month requested

. Ohio Department of Education Project Cash Request Instructions state payments must be requested as needed and for immediate cash needs. Funds may be requested for a maximum of one (1) month plus any negative cash balance. To comply with the “Cash Management Act” 31 CFR part 205, the time lapsed between the receipt and disbursement of funds must be minimized; this includes any draw down of project funds by June 30. Funds MUST be expended within the period of time for which cash is requested.

(Source: http://www.gpo.gov/fdsys/ ; https://ccip.ode.state.oh.us/documentlibrary/ViewDocument.aspx?DocumentKey=78188 ; and http://education.ohio.gov/getattachment/Topics/Finance-and-Funding/Grants/Grants-Management-Online-

Forms/PCR_Instructions1.doc.aspx

)

State of Ohio

As of Fy 2010, there were no automatic payments – LEA’s must request all funds as needed using the online Project Cash

Request (PCR). Cash requests are limited to one advance per month (up to 10% of the approved budget amount) plus any negative balance (amount by which program expenditures exceed project cash received to date).

ODE updated the Project Cash Request form in January 2012 to identify “Total Expenditures by Object Code (year-todate_” rather than just “Total Expenditures” for the grant. Under OMB Circular A-87, Appendix The new PCR form will assist ODE, school districts, and their auditors in determining compliance with Federal program budget modifications prior to incurring costs and making cash requests (Authority: ODE PCR Revisions memo at: https://ccip.ode.state.oh.us/DocumentLibrary/ViewDocument.aspx?DocumentKey=77746 and 34 CFR 80.21). ODE requires a project budget to be completed for each grant that a school district or other agency receives from the ODE.

For school districts, this budget sheet conforms to the Uniform School Accounting System (USAS) as required by Ohio

Auditor of State and those laws and regulations that pertain to federal grants. For other entities, the categories defined by ODE for reporting purposes are the same for school districts and non-school districts.

A completed project budget sheet must be submitted to, reviewed by and approved by the appropriate program office administering the project or grant prior to conducting any grant activities. The ODE approved budget will be sent to the entity office and should be maintained with other important documents pertaining to this grant. Additionally, entities may wish to forward a copy to the fiscal office to provide a complete audit trail. Any revisions in the approved budget amounts must be requested in a proposed revised budget and submitted prior to incurring costs different

from approved amounts. Budget revision requests are then submitted to, reviewed by and approved by the appropriate program office administering the project or grant. All budget revisions must be in writing and on the budget



C. Cash Management form as ODE does not recognize verbal approvals of budgets or budget revisions.

(Authority: ODE Budget Form Instructions at: http://education.ohio.gov/getattachment/Topics/Finance-and-Funding/Grants/Grants-Management-Online-Forms/Budget-

Sheet-Instructions.doc.aspx

)

Districts may request more than one negative-balance-only PCR in a given month. ODE requires written explanation for monthly cash advance requests which exceed the 10% limit. Beginning in calendar year 2012, the CCIP allows school districts to attach PCR supporting documentation (e.g., financial reports that further explain expenditures) to their PCR requests in the CCIP. School districts have the ability to attach PCR supporting documentation only when the application is in the following statuses:

 Draft Started

 Fiscal Representative Retuned Not Approved

Grants Management Returned Not Approved 

The CCIP will not allow school districts to attach supporting documentation once the PCR is submitted to ODE for approval. Additionally, school districts can only upload ONE document per PCR. When a school district uploads an attachment, the CCIP system will overwrite any previously submitted files. (Authority: ODE PCR Attachment Functionality memo at: https://ccip.ode.state.oh.us/DocumentLibrary/ViewDocument.aspx?DocumentKey=78017 and 34 CFR 80.21)

Annually, the ODE Office of Grants Management processes over 40,000 PCRs. On average, more than 40% of the PCRs represent those that are at or below the 10% threshold. Therefore, ODE added new validations to the PCR system to take into consideration the amount of request, cash on hand and the date of submission. When submitted, if all three validations are met, then the PCR is automatically “Grants Management approved” and moves to the Fiscal Dept. for approval. ODE’s Rule of Practice is for Districts to submit PCR’s after the 22 nd of the month for Automatic Approval validation to apply. To satisfy monitoring requirements, Grants Management randomly selects samples of Automatic

Approval at: PCRs for review. (Authority: ODE PCR Enhancements memo https://ccip.ode.state.oh.us/DocumentLibrary/ViewDocument.aspx?DocumentKey=78038 and 34 CFR 80.21)

Funds are to be expended within the period of time for which they are requested (e.g. funds requested for January should be expended during January. Auditors should note that encumbrances could allow cash to exceed immediate cash needs. This should be evaluated on a case-by-case basis). (Authority: ODE online Project Cash Request form) NOTE: A district may choose to put in a cash request whenever they need to cover their obligations which would come due during a specific month. There is no specific timeframe by which they need to submit a cash request. Generally speaking, the districts request funding at the end of the month preceding the month that the cash is needed (e.g., a request is prepared at the end of January which will be approved by ODE and paid so that it arrives in February.) It is incumbent upon the district to complete appropriate cash forecasting and determine the amount and timing of any requests. PCRs submitted for the subsequent month are not processed until the 22 nd of each month (i.e., May’s request will not be approved until 4/22.)

The PCR system contains a separate history log to document the individual cash request approvals and any correspondence between ODE and the LEA on a cash request. Additionally, there are assurances for each cash request that are available for review on each cash request.

Note:

Transferred funds

- ODE has advised LEA’s through its CCIP PCR Frequently Asked Questions page that when program funds are transferred to another eligible program, cash drawdown requests should be made proportionately from the respective programs (CFDA #’s). When an LEA makes a request, the dollar amount and percentage is automatically posted in a separate column of the CCIP for the affected grants. If significant variances are noted during testing, management letter recommendations should be made as appropriate. Following is an excerpt from ODE’s CCIP webpage:

My district transferred funds between grants on the Allocations page of the Funding Application. How does that transfer and subsequent budgeting of transferred funds affect the PCR?




For the purpose of submitting PCRs, transferred funds have been moved back to their original funding source, and any funds budgeted using transferred funds have been moved back to their original funding source as well.

2

For example, if the district has current allocation of $100,000 for Title I, and it chooses to move $50,000 from Title

II-A into Title I, the Adjusted Allocation for Title I becomes $150,000. In the PCR however, the allocation remains

$100,000, and any funds that were budgeted toward Title I are proportionally moved back to Title II-A. In this case,

If all $150,000 was budgeted for Title I, the actual budget for the purpose of submitting a PCR for Title I is $100,000

(2/3), and the remaining $50,000 (1/3) that was budgeted out of Title II-A is added to the budget amount for Title

II-A. So, if a district wanted to request $15,000 to spend toward money budgeted for Title I, they would need to submit a request of $10,000 (2/3) against Title I, and a request of $5,000 (1/3) against Title II-A.

Because the PCR system must inherently assume honest reporting by a local entity, the mere fact that the cash request was approved by ODE does not release the local entity from liability for compliance with the Cash Management Act.

Steps are taken by ODE to ensure compliance but the local entity must provide accurate and complete information to make solid judgments about cash management.


The individual grant application, agreement, or policies may contain the specific requirements for cash management.

(Source: )






), perform procedures to obtain an understanding of internal control sufficient to plan the audit to support a low assessed level of control risk for the program. Plan the testing of internal control to support a low assessed level of control risk for Cash Management and perform the testing of internal control as planned. If internal control over some or all of the compliance requirements is likely to be ineffective, see the alternative procedures in §___.500(c)(3) of OMB Circular A-133, including assessing the control risk at the maximum and considering whether additional compliance tests and reporting are required because of ineffective internal control. For further AOS guidance

2011. on testing federal controls see http://portal/BP/Intranet/AA%20Training%20Fall%202011/FACCR%20Controls%20and%20Federal%20Update.pdf

– Fall







Note: Consider the results of the testing of internal control in assessing the risk of noncompliance. Use this as the basis for determining the nature, timing, and extent (e.g., number of transactions to be

WP Ref.

2 “Moved back” does not mean a transaction needs to be recorded. Rather, this is stating the requirement to submit separate PCR’s for funds originally awarded under the program and for the funds transferred to the program from another program (if any).



C. Cash Management selected) of substantive tests of compliance.

Note: The following procedures are intended to be applied to each program determined to be major.

However, due to the nature of cash management and the system of cash management in place in a particular entity, it may be appropriate and more efficient to perform these procedures for all programs collectively rather than separately for each program.

Note: Many ODE programs are usually advanced funded (unless ODE places a school on the reimbursement basis due as a corrective action step). In these cases, our PCR testing should focus on whether the auditee requested only the funds necessary for their immediate cash flow needs. This is evidenced by the school minimizing the time between the transfer of Federal Funds and the expenditure of those funds for allowable program purposes.

It is generally not necessary to test every PCR for Cash Management compliance. Instead, auditors should test a sampling of PCR’s made during the year. To aid in its subrecipient monitoring and cash request approval process, ODE requires schools to include additional administrative information (e.g., expenditures, budgeted allocations, etc.) on the PCR. AOS does not require auditors to test these administrative items, except as otherwise noted in this section. However, auditors should be aware that a school over-reporting its expenditures on the PCR could potentially result in the school drawing more Federal funds than are necessary for immediate needs. Testing the timely expenditure of Federal cash advances in the FACCR procedures should detect this condition if it exists.

If it is a reimbursement program, then you do need to test the expenditures reported on the PCR for accuracy as noted in the substantive testing below.

(Source: AOS CFAE)

Recipients Other than States and Subrecipients

1) For those programs that received advances of Federal funds, ascertain (and document) the procedures established with the Federal agency or pass-through entity to minimize the time between the transfer of Federal funds and the disbursement of funds for program purposes.

2) Select a sample of Federal cash draws and verify that: a) Established procedures to minimize the time elapsing between drawdown and disbursement were followed. b) To the extent available, program income, rebates, refunds, and other income and receipts were disbursed before requesting additional cash payments as required by the A-102 Common Rule

(§___.22) and OMB Circular A-110 (2 CFR section 215.22). c) If necessary, budget revisions (by object level codes) were approved by ODE prior to incurring costs in excess of originally approved budget amounts.

3) When awards are funded on a reimbursement basis, select a sample of reimbursement requests and trace to supporting documentation showing that the costs for which reimbursement was requested were paid prior to the date of the reimbursement request.

4) Review records to determine if interest was earned on Federal cash draws. If so, review evidence to ascertain whether it was returned to the appropriate agency.












D. RESERVED

 In the 2015 Supplement, OMB has removed several of the compliance requirements that previously were required to be tested across all programs, when applicable. The compliance requirements that were removed are Davis-

Bacon Act (now applicable only for specified programs as a “special test or provision”); Relocation and Real

Property Assistance; and, within Reporting, Subaward Reporting under the Federal Funding Accountability and

Transparency Act. As with any other change in a compliance requirement, if there was a finding(s) in any of these areas in audits conducted using the 2014 Supplement, those findings must continue to be reported in the summary schedule of prior audit findings and the corrective action plan, as provided in OMB Circular A-133

§_.315/2 CFR section 200.511, and be considered in the assessment of risk under OMB Circular A-133

§_.525(b)/2 CFR section 200.519(b). (Source: 2015 OMB Compliance Supplement, Appendix VII)



E. Eligibility – Not Applicable

 Applicable only to SEA’s. Not applicable to LEA’s. Per 2015 OMB Compliance Supplement, Part 2 matrix.



F. Equipment and Real Property Management– Not Applicable

 Per 2015 OMB Compliance Supplement, Part 2.



G. Matching, Level of Effort, Earmarking



§___.500(c).

2)

Matching

– Determine whether the minimum amount or percentage of contributions or matching funds was provided.

3) Level of Effort

– Determine whether specified service or expenditure levels were maintained.

4) Earmarking

– Determine whether minimum or maximum limits for specified purposes or types of participants were met.


The specific requirements for matching, level of effort, and earmarking are unique to each Federal program and are found in the laws, regulations, and the provisions of contract or grant agreements pertaining to the program. For programs listed in the OMB Compliance Supplement, these specific requirements are in Part 4 – Agency Program Requirements or

Part 5 – Clusters of Programs, as applicable.

However, for matching, the A-102 Common Rule (§___.24) and OMB Circular A-110 (2 CFR section 215.23) provide provides detailed criteria for acceptable costs and contributions. The following is a list of the basic criteria for acceptable matching:

 Are verifiable from the non-Federal entity’s records.

Are not included as contributions for any other federally assisted project or program, unless specifically allowed by 

Federal program laws and regulations.

 Are necessary and reasonable for proper and efficient accomplishment of project or program objectives.

 Are allowed under the applicable cost principles.

 Are not paid by the Federal Government under another award, except where authorized by Federal statute to be allowable for cost sharing or matching.

Are provided for in the approved budget when required by the Federal awarding agency. 

 Conform to other applicable provisions of the A-102 Common Rule and OMB Circular A-110 and the laws, regulations, and provisions of contract or grant agreements applicable to the program.

Matching, level of effort and earmarking are defined as follows:

1) Matching

or cost sharing includes requirements to provide contributions (usually non-Federal) of a specified amount or percentage to match Federal awards. Matching may be in the form of allowable costs incurred or in-kind contributions (including third-party in-kind contributions).

2) Level of effort

includes requirements for (a) a specified level of service to be provided from period to period, (b) a specified level of expenditures from non-Federal or Federal sources for specified activities to be maintained from period to period, and (c) Federal funds to supplement and not supplant non-Federal funding of services.

3) Earmarking

includes requirements that specify the minimum and/or maximum amount or percentage of the program’s funding that must/may be used for specified activities, including funds provided to subrecipients. Earmarking may also be specified in relation to the types of participants covered.


The requirements for matching are contained in the A-102 Common Rule (§____.24), OMB Circular A-110 (2 CFR section

215.23), program legislation, Federal awarding agency regulations, and the terms and conditions of the award. The requirements for level of effort and earmarking are contained in program legislation, Federal awarding agency regulations, and the terms and conditions of the award.






US Department of Education Cross-Cutting & Program Specific & ODE Requirements:

1. Matching - LEAs, CBOs, and Other Public or Private Entities

An SEA may require matching funds on a sliding scale based on the relative poverty of the population to be targeted and the ability of the grantee to obtain such matching funds. The match may not exceed the amount of the grant award and may not be derived from other Federal or State funds. Each SEA that requires an entity to match funds shall permit the entity to provide all or any portion of such match in the form of in-kind contributions (20 USC

7174(d)).

2.1 Level of Effort –

Maintenance of Effort

(SEAs/LEAs)

ESEA programs in this Supplement to which this section applies are: Title I, Part A (84.010; 21st CCLC (84.287

); Title

III, Part A (84.365); and Title II, Part A (84.367)

.

As described in Part II, “Program Procedures – General and Program-Specific Cross-Cutting Requirements,” this requirement is a general cross-cutting requirement that need only be tested once to cover all major programs to which it applies.

An LEA may receive funds under an applicable program only if the SEA finds that the combined fiscal effort per student or the aggregate expenditures of the LEA from State and local funds for free public education for the preceding year was not less than 90 percent of the combined fiscal effort or aggregate expenditures for the second preceding year, unless specifically waived by ED.

An LEA’s expenditures from State and local funds for free public education include expenditures for administration, instruction, attendance and health services, pupil transportation services, operation and maintenance of plant, fixed charges, and net expenditures to cover deficits for food services and student body activities. They do not include the following expenditures: (a) any expenditures for community services, capital outlay, debt service and supplementary expenses as a result of a Presidentially declared disaster and (b) any expenditures made from funds provided by the

Federal Government.

If an LEA fails to maintain fiscal effort, the SEA must reduce the amount of the allocation of funds under an applicable program in any fiscal year in the exact proportion by which the LEA fails to maintain effort by falling below 90 percent of both the combined fiscal effort per student and aggregate expenditures (using the measure most favorable to the

LEA) (Section 9521 of ESEA (20 USC 7901); 34 CFR section 299.5).

In some States, the SEA prepares the calculation from information provided by the LEA. In other States, the LEAs prepare their own calculation. The suggested audit procedures for compliance contained in “Level of Effort –

Maintenance of Effort,” should be adapted to fit the circumstances. For example, if auditing the LEA and the LEA does the calculations, the auditor should perform steps a., b., and c.

If auditing the LEA and the SEA does the calculation, the auditor should perform step c for the amounts reported to the SEA.

If auditing the SEA and the SEA performs the calculation, the auditor should perform steps a. and b. and amend step c to trace amounts to the LEA reports. If auditing the SEA and the LEA performs the calculation, the auditor should perform step a. and, if the requirement was not met, determine if the funding was reduced appropriately. In Ohio, the SEA prepares the calculation from information provided by the LEA through EMIS. Auditors do not need to request copies of ODE’s maintenance of effort calculations for local school districts. LEA auditors only need to perform limited tests over LEA maintenance of effort reports submitted to ODE. See Overview of ODE MOE Procedures below for more information.

ARRA provides that, upon prior approval from the Secretary, an SEA or LEA may treat funds from the

State Fiscal Stabilization Fund (SFSF) Program (CFDA 84.394 and CFDA 84.397) that are used for elementary, secondary, or postsecondary education as non-Federal funds for the purpose of any requirement to maintain fiscal effort under any other program that ED administers . The auditor should check whether the SEA has met ED’s requirements for prior approval to determine whether, as



G. Matching, Level of Effort, Earmarking applicable, an SEA or LEA appropriately included expenditures of SFSF funds in maintenance of effort calculations (see ED’s guidance for Funds under Title I, Part A of the Elementary and Secondary

Education Act of 1965 Made Available Under The American Recovery and Reinvestment Act of 2009 for prior-approval criteria) (Section 14012(d) of ARRA). Although funds under SFSF Program were not available for obligation after September 30, 2011, because maintenance of effort calculations under

ESEA programs for school year 2014-2015 funds are based on July 1, 2012 to June 30, 2013 expenditures compared to July 1, 2011 to June 30, 2012 expenditures, those obligations must be included in the first 3 months of the maintenance of effort comparison year.

Like SFSF funds, Ed Jobs funds are no longer available for obligation, but may affect maintenance of effort calculations under ESEA programs for school year 2014-2015. Ed Jobs funds were available for obligation through

September 30, 2012. An SEA or LEA, was required to get prior approval from the Secretary, before treating Ed Jobs funds (CFDA 84.410) that were used for elementary, secondary, or postsecondary education as non-Federal funds for the purpose of any requirement to maintain fiscal effort under any other ED program (Section 101(5) of Pub. L. No.

111-226; Guidance - When to Treat Expenditures of Education Jobs Funds as State or Local Funds for Purposes of the

Fiscal Requirements under Title I, Part A of the Elementary and Secondary Education Act of 1965 (November 2010)).

Maintenance of Effort – Overview of ODE MOE Procedures:

A Local Educational Agency (LEA) may receive its full allocation of Title I, Part A, 21st Century Community Learning

Centers, and Improving Teacher Quality State Grants funds for any fiscal year only if the State educational agency

(SEA) determines that the LEA has maintained its fiscal effort in accordance with section 9521 of the Elementary and

Secondary Education Act. The full list of grants (both active and inactive) for which this narrative applies includes the following :



Title I, Part A



Title I, Part B, Subpart 3, Even Start;



Title I, Part D, Prevention and Intervention Programs for Children and Youth who are Neglected, Delinquent, or

At-Risk;



Title I, Part F, Comprehensive School Reform;



Title II, Part A, Improving Teacher Quality State Grants;



Title II, Part D, Educational Technology State Grants;



Title III, Part A, English Acquisition State Grants;



Title IV, Part A, Safe and Drug-Free Schools and Communities;





Title IV, Part B, 21st Century Learning Centers ; and

Title VI, Part B, Subpart 2, Rural Education.

Section 9521 provides that an LEA may receive funds under Title I, Part A and 21st Century for any fiscal year only if the SEA finds that either the combined fiscal effort per student or the aggregate expenditures of the LEA and the

State with respect to the provision of free public education by the LEA for the preceding fiscal year was not less than

90 percent of the combined fiscal effort or aggregate expenditures for the second preceding fiscal year.

The Office of Federal Programs (OFP) uses EMIS Spring Period N (ADM – average daily membership) and EMIS

Period H (fiscal) data reported by LEAs for the Maintenance of Effort (MOE) determination. EMIS Period H is collected from July through September. The LEAs have until September 30th of each year to verify and correct their financial data (period H) from the previous school year in the EMIS system.

The OFP receives data from data mangers to determine which LEAs did not meet MOE. Included in aggregate expenditures are state and local funds for free public education (administration, instruction, attendance and health services, pupil transportation services, operation and maintenance of plant, fixed charges, and net expenditures to cover deficits for food services and student body activities). Expenditures for community services, capital outlay, debt service, or supplemental expenses made as a result of a presidentially declared disaster are not included in the determination. In addition, any expenditure made from funds provided by the Federal government is excluded from the determination.

Aggregate expenditures consist of expenditures reported by LEAs under funds 001 and 016 into EMIS aggregated into the expenditure per pupil categories.

Maintenance of Effort – Specific Procedures:




The OFP monitors whether LEAs meet MOE requirements. For LEAs thatdo not meet MOE requirements and do not receive a waiver from the U.S. Department of Education, their allocations will be reduced in the next state fiscal year.

After the EMIS Reporting Period closes, the year-end reporting is finalized. The EMIS data is then loaded into a webbased system, which calculates MOE and is available to all LEAs under the Comprehensive Continuous Improvement

Plan (CCIP). The system calculates MOE using two methods – per pupil expenditures and aggregate expenditures.

Additionally, in determining maintenance of effort for the fiscal year immediately following the fiscal year in which an

LEA failed to maintain effort, ODE considered an LEA's expenditures in the year the failure occurred to be no less than 90 percent of the 90 percent of the expenditures for the third preceding year.

The OFP has a MOE team, consisting of: Elena Sanders, Assistant Director/MOE Designee, James Lansden, Kelsey

Holt, and Nannette Sherman. The OFP MOE team reviews all LEA’s missing data elements used in determining

Maintenance of Effort that were not reported to ODE. If the LEA was not operating, this would explain why there are missing data elements, so this is shown within the MOE system under the organization status column. However, if the LEA was in operation and had missing data elements needed for MOE determination, the LEA was required to either develop a corrective action plan or submit necessary data elements obtained according to the ODE developed protocol, or have an Agreed Upon Procedures engagement performed. Once the necessary data is obtained for these LEAs, it is entered into the MOE system. For LEAs that pooled their state, local and federal funds into the

Schoolwide Pool, a modified procedure is used.

Four state Supported Organizations (Ohio School for the Blind (OSB), Ohio School for the Deaf (OSD), Ohio

Department of Youth Services (DYS) and Ohio Council for the Social Studies (OCSS) provide expenditure data directly to OFP and do not have data loaded into EMIS. However, these entities submit Excel spreadsheets to Elena

Sanders, Assistant Director/OFP MOE Designee, who monitors these entities to ensure they meet MOE requirements through the CPS system.

Entities that do not report their data into EMIS and do not have the consolidated application are not subject to MOE requirements and not monitored by Elena Sanders, Assistant Director/OFP MOE Designee. This includes closed

LEAs, LEAs that are not recipients of the specific grants monitored, and Community Based Organizations (CBOs).

(Note: Entities that can receive 21st Century Community Learning Center funds include Local Educational Agencies

(LEA) and CBOs. CBOs are considered non-LEA entities and not subject to Maintenance of Effort requirements.)

After the initial MOE determination is made, the LEAs that did not meet the current MOE requirement are notified by the OFP, as evidenced by an e-mail sent from the MOE system.

(Emails are sent to the LEA’s Superintendent,

Treasurer, and CCIP contact). Information provided includes directions on how to request a waiver and where to direct the request.

LEAs have to request a MOE waiver every year that they do not meet the maintenance of effort requirement. The

LEAs can submit information and request a waiver directly in the MOE application, and then ODE requests the waiver from USDoE on the LEAs behalf.

The USDoE provides ODE with an Excel spreadsheet to complete for the LEAs not meeting MOE requirements. For any LEAs requesting a waiver, the OFP provides each LEA’s expenditures, revenue and the LEA explanations in the spreadsheet.

Once completed, the spreadsheet is sent to the USDoE.

The Secretary may waive the MOE requirement if it is determined that such a waiver would be equitable due to —



Exceptional or uncontrollable circumstances such as a natural disaster; or



A precipitous decline in the financial resources of the LEA. [Section 9521(c)]

If additional information is needed USDoE requests the ODE, OFP MOE designee to clarify, verify or obtain additional information from LEA.

After the OFP receives USDoE response regarding the waivers, Elena Sanders, Assistant Director/MOE Designee, enters a copy of the letter to all LEAs that have received an approval of their request in the documents tab of the MOE application. For LEAs that did not receive a waiver or did not request one from USDoE, Elena Sanders, Assistant

Director/MOE Designee, enters a note in the appropriate state fiscal year CCIP application History Log to notify them that their allocations are to be reduced (by the method most favorable for LEA) percentage by which LEA did not meet

MOE. LEAs allocations are reduced by the percentage most favorable to the LEAs in the appropriate year of the CCIP consolidated application for grants covered by this requirement.

Note: Clarification on MOE calculation and tests:




 Fy 2015 allocations are affected by the MOE calculation performed in Fy 2014

 Fy 2014 MOE calculations compare Fy 2013 to Fy 2012

 Therefore for Fy 2015, we will test Fy 2013 information when performing the applicable steps.

OFP usually reduces first time allocations in July of the subsequent fiscal year. Once the reallocation process is complete, OFP adjusts the MOE reductions again in March of the following calendar year if needed.

(Sources:



Elena Sanders, ODE Education Consultant & MOE Designee, Office of Federal Programs



Roger Holbrook, ODE ITO Information Policy and Management (EMIS)



AOS State Single Audit, ODE, Project No. 31A36FRAN-FA113, July 1, 2012 through June 30, 2013;

(available at: 

Regulatory: ODE EMIS Manual, Chapters 1, 2, 4, and Appendix I http://education.ohio.gov/Topics/Data/EMIS/EMIS-Documentation/Current-EMIS-Manual ).



Regulatory: ODE Reporting School District Revenue and

Spending Per Pupil Handbook (aka: Expenditure Flow

Model Handbook) (available at: http://education.ohio.gov/Topics/Finance-and-Funding/Finance-Related-

Data/Expenditure-and-Revenue/Expenditure-Flow-Model-EFM ) – For Fy 2012 and prior



Regulatory: ODE CCIP Maintenance of Effort guidance, Revised as of October 28, 2010 (available at: https://ccip.ode.state.oh.us/DocumentLibrary/ViewDocument.aspx?DocumentKey=1040 ) )

See ODE’s Expenditure Amounts by Category (Period H) Manual at http://education.ohio.gov/Topics/Data/EMIS/EMIS-

Documentation/Archives/EMIS-Report-Explanations-and-Validations/FY13-EMIS-Validation-and-Report-Explanation-

Docume .

2.2 Level of Effort –

Supplement Not Supplant

(LEAs)

The 21st CCLC supplement not supplant provision applies to the use of 21st CCLC funds to support expanded learning time under ESEA Flexibility. Thus, an SEA receiving a waiver to permit an eligible entity to use 21st CCLC funds to provide activities that support expanded learning time programs must ensure that the 21st CCLC funds are used to supplement, and not supplant, Federal, State, local, or other non-Federal funds that, in the absence of the 21st CCLC funds, would be made available for programs and activities authorized under the 21st CCLC program (ESEA

4203(a)(9) and 4204(b)(2)(G)).

PROJECT DURATION - Approved grants will be funded for a five-year period contingent upon new and continued

USDOE's annual appropriation to the state. Beginning if FY 14, the first year of the grant awarded will be considered implementation or “probationary year”. Additional monitoring requirements will be addressed during the year including program implementation timeline, adherence to the approved grant application, implementation of service, sustainability planning, and program effectiveness will determine the continuation of funding into subsequent years.

Additionally, the first three years will be funded at 100 percent, and the fourth and fifth years will be funded at 75 percent and 50 percent, respectively.



ESEA programs in this Supplement to which this section applies are: Title I, Part A (84.010); MEP (84.011); 21st

CCLC (84.287) ; Title III, Part A (84.365); MSP (84.366); and Title II, Part A (84.367)

.

General

– An SEA and LEA may use program funds only to supplement and, to the extent practical, increase the level of funds that would, in the absence of the Federal funds, be made available from non-Federal sources for the education of participating students. In no case may an LEA use Federal program funds to supplant funds from non-

Federal sources (Title I, Part A, Section 1120A(b) of ESEA (20 USC 6321(b)); MEP, Section 1304(c)(2) of ESEA (20

USC 6394(c)(2)); 21st CLCC, Section 4204(b)(2)(G) of ESEA (20 USC 7174(b)(2)(G)); Title V, Part A, Section 5144 of

ESEA (20 USC 7217c); Ed Tech, Section 2413(b)(6) of ESEA (20 USC 6763(b)(6)); Title III, Part A, Section 3115(g)

(20 USC 6825(g)); MSP, Section 2202(a)(4) of ESEA (20 USC 6662(a)(4)); and Title II, Part A, Sections 2113(f) and

2123(b) of ESEA (20 USC 6613(f) and 6623(b))).




Except as noted under

Schoolwide Programs

below with respect to Title I, Part A funds or other Federal funds that are consolidated with State and local funds, in the following instances, it is presumed that supplanting has occurred: a. The SEA or LEA used Federal funds to provide services that the SEA or LEA was required to make available under other Federal, State or local laws. (See note below,

ESEA flexibility).

ESEA Flexibility,

regarding this presumption and b. The SEA or LEA used Federal funds to provide services that the SEA or LEA provided with non-Federal funds in the prior year. c. The SEA or LEA used Title I, Part A or MEP funds to provide services for participating children that the SEA or

LEA provided with non-Federal funds for nonparticipating children.

These presumptions are rebuttable if the SEA or LEA can demonstrate that it would not have provided the services in question with non-Federal funds had the Federal funds not been available.

Schoolwide Programs

– In a Title I schoolwide program, a school is not required to use Title I, Part A funds to provide supplemental services to identified children. In other words, a Title I school operating a schoolwide program does not have to (1) show that Title I, Part A funds used within the school are paying for additional services that would not otherwise be provided; or (2) demonstrate that Title I, Part A funds are used only for specific target populations (Title

I, Part A, Section 1114(a)(2)(A) of ESEA (20 USC 6314(a)(2)(A)); 34 CFR section 200.25(c)). Similarly, if a school operating a schoolwide program consolidates other Federal funds with State and local funds, the school is exempt from meeting most statutory or regulatory provisions of each consolidated program and from maintaining separate fiscal accounting records that identify specific activities supported by each program if the school meets the intent and purposes of each program. Under these circumstances, the school may meet the supplement not supplant requirement in Section 1114(a)(2)(B) of the ESEA for a school operating a schoolwide program (Title I, Part A,

Section 1114(a)(3) (20 USC 6314(a)(3)); 34 CFR section 200.29).

The supplement not supplant requirement in Section 1114(a)(2)(B) of the ESEA (20 USC 6314(a)(2)(B)) applies to a

Title I school operating a schoolwide program. In order for the school to spend Title I, Part A funds and other

Federal funds that it consolidates with State and local funds, the LEA must provide the school all of the non-Federal funds it would otherwise have received from the LEA if it were not operating a schoolwide program, including those funds necessary to provide the basic education program for all students and services required by law for children with disabilities and children with limited English proficiency (Title I, Part A, Section 1114(a)(2)(B) of ESEA (20 USC

6314(a)(2)(B)); 34 CFR section 200.25(d)). Accordingly, the presumptions that supplanting has occurred listed above do not apply with respect to Title I, Part A funds or other Federal funds that are consolidated with State and local funds in a Title I school operating a schoolwide program.

Title I, Part A and MEP

– An SEA and LEA may exclude from determinations of compliance with the supplement not supplant requirement supplemental State or local funds spent in any school attendance area or school for programs that meet the intent and purposes of Title I, Part A or the MEP, respectively, as identified in Title I of ESEA (Sections

1120A(d) and 1304(c)(2) of ESEA (20 USC 6321(d) and 6394(c)(2)); 34 CFR sections 200.79 and 200.88).

Title III, Part A

– An SEA or LEA may only use funds under Title III, Part A to supplement the level of Federal, State and local public funds that, in the absence of the Title III funds, would have been provided for programs for limited

English proficient children and immigrant children and youth (Section 3115(g) of ESEA (20 USC 6825(g))).

ESEA Flexibility

– A State that has received ESEA flexibility [See Section II, Program Procedures, ESEA Flexibility] may have enacted laws or promulgated regulations, or incorporated existing laws and regulations, modified as necessary, to meet the principles of ESEA flexibility in its approved request. Because these State laws and regulations are critical to implementing the SEA’s request, ED presumes that State laws or regulations an SEA has incorporated into its ESEA flexibility request stem from that request and would not have been required, at least in precisely that form. Thus, an

SEA or LEA that uses Federal funds subject to a supplement not supplant requirement to implement elements of the

SEA’s flexibility request that is required by State law or regulation would not violate the “required by law” presumption of supplanting in paragraph 2.2.a above (see

ESEA Flexibility Frequently Asked Questions

, Question A-

18).




 Does the 21st CCLC supplement, not supplant provision apply to the use of 21st CCLC funds to

support expanded learning time under ESEA flexibility? o Yes, the 21st CCLC supplement, not supplant provision applies to the use of 21st CCLC funds to support expanded learning time under ESEA flexibility. 21st CCLC funds are used to supplement, and not supplant, Federal, State, local, or other non- Federal funds that, in the absence of the 21st CCLC funds, would be made available for programs and activities authorized under the 21st CCLC program (ESEA

4203(a)(9) and 4204(b)(2)(G)). (Source: ESEA Flexibility Waiver Impact on FY13 21st CCLC Applicants,

February 15, https://ccip.ode.state.oh.us/documentlibrary/ViewDocument.aspx?DocumentKey=78081 )

2012

The CCIP submitted to ODE should not be confused with the school-wide plan. The CCIP is a district level budgeting, planning and approval process. Therefore, LEA’s are aggregating the uses of the various federal programs in the buildings up to the district level. The ODE approves all activities to be conducted by the LEA via the CCIP. In many cases, the budgeted expenditures reflected on the CCIP are at the district-wide-level; however, equal opportunities exist LEA’s to be expending on behalf of individual buildings.

Almost all the complexity associated with the accounting for school-wide programs lies at the district-level accounting.

It is easy to account for revenues and expenditures at the building level (only one budget and one revenue code is needed) and at the state level (the LEA must follow the business rules). At the district level, however, it is very complex, especially if there is a combination of co-mingled school-wide programs, non-commingled school-wide programs, targeted assistance buildings and non-title I buildings (which also participate in all the other titles and in

IDEA). Co-mingling state, federal and local funds- permitted at the school-wide building level as long as the building/LEA can demonstrate that they have met the intent and purpose of all contributing federal programs.

An LEA can budget for many grants tracked as one fund at the building level. However, the LEA would also need to create a pool of funds at the district level that would combine the participating program funds. Reasonably, there would need to be a pool for each building. The LEA can make decisions about how much of each Title program is to be distributed and available for each of the buildings.

The “business rule” was created by ODE as a means of providing the flexibility described in the law under transfer of funds. The rule also allows the same degree of flexibility in a school-wide program while providing a rational basis for determining and reporting carryover and the expenditure of funds. The business rule essentially states that all expenditures are in the exact proportion as the revenue. If a program contributes 41% to the pool, then that program pays 41% of each expenditure from the pool. This is different from taking money for the first quarter from a title I program and then switching to another program in the 2nd quarter. For personnel, this eliminates the requirement for time and effort logs, as this is a single cost objective under OMB Circular A-87 (codified in 2 CFR Part

225) (2 CFR part 225). It meets the requirement of the law which allows LEA’s to not track individual program expenditures but allows them to make a definite and precise determination of how many of each program's funds have been expended. However, any school-wide program would need to have the appropriate documentation that they have conducted the approved activity.

Since each program is approved separately, but expended as one program, there is no change in the FER. There is a difference, however, in how you request funds via the PCR and how you determine the prorated expenditure. The

FER already accounts for two or more funds. Based on the funds transferred, the FER already follows the business rule for transferred funds. It unbundles the reported expenditures and calculates the prorated amounts. Therefore, the ability to file an accurate FER can be done by using the same set of business rules used for transferred funds.

Expenditures are equally distributed across all contributing programs in the same proportion as the program contribution. All expenses are paid from the pool and the determination of what fund is used is a simple proration calculation. For the FER and PCR, all expenditures should be prorated and then request or report funds based on that prorated amount. Therefore, if title I constitutes 29% and special ed. constitutes 22% of the building revenue, they are automatically 29% and 22% respectively of the expenditures.




Suggestions for Determining that, in the Absence of Federal Program Funds, Services Would Have Been

Eliminated:

Determining when supplanting has or has not occurred – i.e., whether in the absence of Federal program funding, a

State agency or school district would have continued to provide services with State and local funds – will depend on assessment of the individual facts and circumstances of each situation. This assessment, in turn, will depend upon a review of the available State agency or district records. There is no precise formula for determining what kinds of records will overcome a presumption of supplanting, or otherwise demonstrate that Federal funds were used in a supplemental manner. However, there are some procedures which can be performed to help determine whether supplanting may have occurred.

In particular, a school district that believes it could not maintain services previously paid with State or local funds had

Federal program funds not been available should:

1.

Be able to demonstrate a decrease of State and local funds from the prior year and the maintenance or increase in standard operating costs (e.g., salaries, benefits, supplies, etc.) from the prior year;

OR

2.

Be able to demonstrate that –

 Any increase in State and local funds is less than increases on the standard operating costs; AND

 State and local funds have not been redirected to a new activity.

AND be able to document that –

 The Board of Education is on record as deciding to eliminate the activity under question unless a new source of funds is made available from non-State and non-local funds (in the absence of State and local funds); AND

The activities to be funded under a particular Federal program are clearly consistent with the purposes of that program.

For guidance in the CCIP document library which

( https://ccip.ode.state.oh.us/DocumentLibrary/ViewDocument.aspx?DocumentKey=1043 ) addresses this


A presumption of supplanting exists in situations where a treasurer is awarded a supplemental contract to manage Federal and state funds within a school district. Additionally, this same prohibition is present for direct charges to a Federal grant for a portion of the treasurer’s salary. (See Section A “Unallowable Activities” for further information)

(Source: http://education.ohio.gov/getattachment/Topics/Finance-and-Funding/State-Funding-For-Schools/Career-

Technical-Funding/Grants-Management-Guidance/Supplemental-Contracts.pdf.aspx

)

The United States Department of Education issued guidance on Supplement Not Supplant and Sequester . The guidance focuses on the issue of when a local educational agency (LEA) choses to use local funds to make up for a decrease in

Title I, Part A (Title I) funds in order to continue providing Title I services and whether this might cause a supplanting problem if an LEA replaces the local contribution with Title I funds in a subsequent year. USDoE does not consider this situation a supplant.

Rather, the local contribution would merely serve to provide the same or similar level of Title I serve per sequestrations – that is, the local funds would help implement the LEAQ’s federal Title I program. Absent the local contribution, the LEA’s Title I program would be less robust. To ensure that a local contribution does not raise the presumption of supplanting, an LEA should document that the local funds are, in fact, being used to support the Title I program and meet all applicable Title I requirements.




(Source: ODE CCIP Note #308 - https://ccip.ode.state.oh.us/documentlibrary/ViewDocument.aspx?DocumentKey=78657

& USDE guidance at https://ccip.ode.state.oh.us/DocumentLibrary/ViewDocument.aspx?DocumentKey=78655 )

3. Earmarking

Transferability

(SEAs and LEAs)


) and Title II, Part A

(84.367)

.

Except for 21st CCLC (CFDA 84.287

), LEAs not identified for improvement or corrective action under Section 1116 of the ESEA may also transfer up to 50 percent of each fiscal year’s funds from one or more of the listed applicable programs to another listed applicable program, or to Title I, Part A. LEAs identified for improvement may transfer up to 30 percent of their allocation base. LEAs identified for corrective action may not transfer funds (Sections 6123(a) and (b) of ESEA (20 USC 7305b(a) and (b))).

The allocation base for a program for a fiscal year equals that fiscal year’s original funding plus funds transferred into the program for that fiscal year. Funds may be transferred during a fiscal year’s carryover period, as long as the total amount transferred from the fiscal year’s allocation base does not exceed the maximum percentage.

Funds must be transferred to the receiving program’s allocation for the same fiscal year that the funds were allocated to the transferring program (Sections 6123(a) and (b) of ESEA (20 USC 7305b(a) and (b))).


For further AOS guidance on MOE, see http://portal/BP/Intranet/AA%20Training%20Fall%202012/ESEA%20Maintenance%20of%20Effort%20(MOE)%20for%20

Schools.pdf

– Fall 2012.

The individual grant application, agreement, or policies may contain the specific requirements for matching, level of effort, and earmarking.

(Source: )






), perform procedures to obtain an understanding of internal control sufficient to plan the audit to support a low assessed level of control risk for the program. Plan the testing of internal control to support a low assessed level of control risk for Matching, Level of Effort, Earmarking and perform the testing of internal control as planned. If internal control over some or all of the compliance requirements is likely to be ineffective, see the alternative procedures in §___.500(c)(3) of OMB Circular A-133, including assessing the control risk at the maximum and considering whether additional compliance tests and reporting are required because of ineffective internal control.

2011.

For further AOS guidance on testing federal controls see http://portal/BP/Intranet/AA%20Training%20Fall%202011/FACCR%20Controls%20and%20Federal%20Update.pdf

– Fall











1) Matching

a) Perform tests to verify that the required matching contributions were met. b) Ascertain the sources of matching contributions and perform tests to verify that they were from an allowable source. c) Test records to corroborate that the values placed on in-kind contributions (including third party inkind contributions) are in accordance with the OMB cost principles circulars, the A-102 Common Rule,

OMB Circular A-110, program regulations, and the terms of the award. d) Test transactions used to match for compliance with the allowable costs/cost principles requirement.

This test may be performed in conjunction with the testing of the requirements related to allowable costs/cost principles.

2.1) Level of Effort – Maintenance of Effort

The Ohio Department of Education performs the maintenance of effort calculation for all LEA’s.

Auditors do not need to request copies of maintenance of effort computations for local school districts from ODE. LEA auditors need only test step c below to gain assurances over the amounts reported to ODE. Steps a, b, and d from the 2015 requirements in the OMB Compliance

Supplement have been omitted from this FACCR.

Note: Clarification on MOE calculation and tests:

 Fy 2015 allocations are affected by the MOE calculation performed in Fy 2014

 Fy 2014 MOE calculations compare Fy 2013 to Fy 2012

 Therefore for Fy 2015, we will test Fy 2013 information when performing the applicable steps.

IMPORTANT NOTE: Auditors should carefully consider the effect on compliance with maintenance of effort requirements when testing the procedures enumerated below. For example, inaccurate reporting of

annual

average daily membership (ADM) or state and local expenditures does not necessarily equate to noncompliance with maintenance of effort requirements. If applicable, auditors should consider the source of errors detected in annual

ADM or state and local expenditures and evaluate whether such errors represent noncompliance or an internal control deficiency. If noncompliance exists, auditors should cite the following

Federal maintenance of effort guidance together with the appropriate ODE regulatory guidance above:

Section 9521 of ESEA (20 USC 7901) and 34 CFR section 299.5 require the Ohio Department of

Education (ODE) to reduce the amount of the allocation of funds under an applicable program if an LEA fails to maintain fiscal effort in any fiscal year by falling below 90 percent of both the combined fiscal effort per student and aggregate expenditures (using the measure most favorable to the LEA).

WP Ref.




For noncompliance with reported Annual ADM, include >>> ODE Education Management

Information System (EMIS) Manual, Chapters 1, 2, 4, and Appendix I require LEAs to report the annual average daily membership per student for Period N (Year End). Add additional supporting language, if necessary.

For noncompliance with reported General Expenditures, include >>> ODE Reporting School

District Revenue and Spending Per Pupil Handbook (aka: Expenditure Flow Model Handbook) requires LEAs to report District- and Building-level financial data for aggregate “general expenditures” using the Expenditure Flow Model for Period H. Add additional supporting language, if necessary.

c) Perform procedures to verify that the amounts used in the computation were derived from the books and records from which the audited financial statements were prepared.

The procedures below have been designed to assist LEA auditors testing this step at the LEA level. The information below explains how to test certain EMIS report submissions for accuracy and completeness to satisfy this substantive step.

Maintenance of Effort – LEA Annual ADM Substantive Testing Procedures:

ODE Office of Federal Programs (OFP) uses EMIS Yearend Period N (Annual Average Daily Membership or Annual ADM/Enrollment) and EMIS Financial Period H (Expenditure Per Pupil Categories - EPP) data reported by LEAs to perform the MOE computation. This computation is tested during the State’s annual single audit. Auditors should not request this computation from ODE for LEA MOE testing. Instead, LEA auditors need only verify the amounts LEAs submit through EMIS to ODE for the MOE computation are accurate and complete based on the underlying books and records. LEA auditors should perform the steps that follow for Annual ADM and Financial Expenditure Reports.

IMPORTANT NOTES:

There are two types of reports auditors use to test Annual ADM: (1) Yearend Period N (Annual) ADM

Reports available from the Secure Data Center (SDC), or (2) Financial (Expenditure Per Pupil Categories -

EPP) Reports for Period H available in EMIS (Fy13 and forward the report the LEAs should pull is

TXT_20XXH_FIN_EXPND_AMT_BY_CAT. General Expenditure amount was used for MOE calculations.).

The reporting period for SDC Period N reports is from early May through mid-July. The reporting period for EPP Period H reports is from the first of July through the end of September. The Annual ADM information collected during the Yearend (Period N) reporting period is final by the end of July. Although

Period H reports also include Annual ADM, Period H reports are not final until October. Therefore, Period

N SDC reports will usually be available for audit sooner than Period H EPP reports.

Unlike the October ADM count week (which represents a snapshot of student attendance for only one week during the fiscal year, Yearend Period N reports include student data elements for the entire fiscal year. Therefore, auditors cannot rely on our testing of the Period K ADM count week for Ohio

Compliance Supplement, Chapter 6 requirements for MOE purposes.

Joint Vocational Schools (JVS) and Educational Service Centers (ESCs) report their own Enrollment/ADM in EMIS for the respective JVS and preschool students attending their schools. ODE adds JVS and ESC preschool students to the home public school district’s Annual ADM when performing the MOE computation.

If you are also testing alternative MOE procedures for the Special Education IDEA Part B cluster, the enrollment ADM portion of the testing is the same, so auditors may test it for one major program and leverage the testing for the other major program. However, the EPP testing is different, so you would have to test such for each major program.

If you are also testing alternative MOE procedures for one of the ESEA programs to which they apply (ie.




Improving Teacher Quality, etc.), both the enrollment ADM and EPP procedures are the same, so auditors may test it for one major program and leverage the testing for the other program.

Annual ADM Substantive Steps:

1. Request the EMIS Coordinator or other District-designated official 3 to log into the Secure Data

Center (SDC), a secure data website that allows users to run various reports of EMIS data, and run the following “Enrollment Reports” (i.e., Annual ADM) for Yearend Period N of the fiscal year being tested

( 2013 ). A representative of the school district must sign in to the SDC through their SAFE account and have the proper SDC role in OEDS. Once in the SDC the path to the appropriate report(s) is: Secure

Data Warehouse>Shared Reports>Reports for Analysis>Enrollment. To get enrollment/ADM for the entire school district, the representative must run the District Enrollment (ADM) – Customizable report and select the school year that is being tested. To get enrollment/ADM for a school or to run the report for a community school or the Dayton Regional STEM School, the representative must run the School

Enrollment (ADM) – Current Data or School Enrollment (ADM) – Customizable report.

(Since year end

SDC Enrollment reports will not be available until October, auditors may need to request SDC Enrollment reports for the previous fiscal year instead. If using prior fiscal year SDC reports, auditors should also use prior fiscal year EMIS reports when performing steps 3 and 4 for Annual ADM below.)

:

• District-Level count by grade level

• Building-Level count by grade level

• SSID level count for a selected grade(s) and building(s)

(Note: Due to the volume of these reports, LEA auditors should consider selecting only a few SSID level reports for testing. If control risk over ADM is higher, auditors might consider selecting one grade in each building of the District.)

2. Haphazardly select a few Period N Statewide Student Identifiers (SSIDs) from the SDC

SSID Level

Count For Selected Grade And Building

Period N report and perform the following steps to support mathematical accuracy of these reports: a. Sum the days of attendance, and those excused and unexcused and divide by the number of days the LEA was in session as documented in the School Calendar. This is the ADM for the SSID. b. Ask for management’s explanation for any significant differences.

3.

Compare the total ADM on the SDC

SSID Level Count For Selected Grade And Building

Period N report to the Period N Building-level and District-level SDC Enrollment Reports for reasonableness.

Ask for management’s explanation for any significant differences.

4.

For the SSID’s selected in Step 2 above, request the representative building attendance officers or

EMIS Coordinator to provide access to student attendance records and determine whether a break in enrollment occurred during the fiscal year. This may require reviewing attendance data in the school district’s electronic student information system (e.g., DASL, PowerSchool, Progress-Books, etc.).

 No further testing is required if students were enrolled and attending for the entire fiscal year.

 For students with a break in enrollment, determine whether the school district has

3

Generally, the EMIS Coordinator has access to the Secure Data Center (SDC); however, each school district has the ability to establish access rights for individuals within the District. If the EMIS Coordinator should be able to direct LEA auditors to the appropriate contact person if the EMIS Coordinator is not the designated SDC user. Also, districts may be able to request the necessary reports from their A-site as consortiums also have access rights to SDC. Instructions for

Accessing the SDC website are available at: http://education.ohio.gov/GD/DocumentManagement/DocumentDownload.aspx?DocumentID=31643 . Only authorized

LEA personnel will be able to use these instructions to successfully access this secure website.



G. Matching, Level of Effort, Earmarking appropriate supporting documentation to support the reasonableness and timeliness of student withdraws or transfers.

 A normal break in enrollment may occur for students in open enrollment, attending classes at an Educational Service Center or Joint Vocational School, and students enrolled in Post-Secondary Enrollment Options (PSEO). However, school districts should maintain documentation in student attendance files to support these

“breaks.”

 For “Unexcused” absences, school districts should maintain supporting documentation for student withdrawals due to truancy. For example, school districts should maintain documentation in student attendance files to support whether truancy withdraws were made only after due process in accordance with the school

Board’s policy.

 Each public school board is required under Ohio Rev. Code §3321.191 to adopt a policy to guide employees in addressing and ameliorating the habitual truancy of students. If the board has established an alternative school, assignment to the alternative school must be included in the policy as an interventions strategy.

5.

 For building to building transfers, school districts should maintain documentation to support why the student was moved.

 An example of a valid reason for building to building transfers includes the

Where Kids Count (WKC) program. Under WKC, a school that educates all of the Limited English Proficient (LEP) students in the district because of expertise or resources in one building – those students will count in their resident school’s report card results.

ODE’s accountability business rules for Where Kids Count (WKC) are  available at: http://education.ohio.gov/getattachment/Topics/Data/Report-

Card/2010-2011-WHERE-KIDS-COUNT.pdf.aspx

 For more information on valid withdraw codes and reasons, refer to Chapter 2 of the

ODE EMIS Manual at: http://www.education.ohio.gov/GD/Templates/Pages/ODE/ODEPrimary.aspx?Page=2

&TopicID=1794&TopicRelationID=1102 .

Obtain the financial ADM (which used to appear on the Period H report prior to Fy 13) by:

 Going to: Reportcard.education.ohio.gov

 Select ‘Download Data’ in the black bar at the top

 Select the year, ‘Financial Expenditures’, and then ‘EFM Data’

 Once the spreadsheet opens, perform the following calculation to arrive at the financial ADM:

 Divide the ‘Operating Expenditures’ in column D, by the ‘Operating EPP’ in column J

6. Perform the following procedures: a.

Compare the financial ADM calculated in step 5 above to the Total Annual ADM on the SDC

Period N Enrollment Reports for reasonableness.

 IMPORTANT NOTE: The SDC Period N Enrollment Reports include local boards of

Developmental Disability (DD), Ohio School for the Deaf, and Ohio School for the Blind student data (as reported by the resident school district) in the Annual ADM. However, these students are not included in the financial ADM. While we do not expect these differences to be significant, auditors should be aware that some minor differences are to be expected. b. Ask for management’s explanation for any significant differences.

Important Notes:

Joint Vocational Schools (JVS) and Educational Service Centers (ESCs) report their own

Enrollment/ADM in EMIS for the respective JVS and preschool students attending their schools. ODE



G. Matching, Level of Effort, Earmarking adds JVS and ESC preschool students to the home public school district’s Annual ADM when performing the MOE computation. However, LEA auditors scan test EMIS enrollment/Annual ADM separately for these schools at the local level. Meaning, a JVS auditor should test the JVS EMIS enrollment/Annual ADM when testing applicable major programs for the JVS. Similarly, a public school district auditor does not need to include enrollment/Annual ADM for the JVS or ESC when testing enrollment/Annual ADM for applicable major programs at the public school district.

Aggregate General Expenditures Substantive Steps:

EMIS Financial EPP Period H data should include District- and Building- Level financial information for aggregate “general expenditures” using the Expenditure Per Pupil Categories (EPP) described in ODE’s

Expenditure Amounts by Category (Period H) Manual at http://education.ohio.gov/Topics/Data/EMIS/EMIS-Documentation/Archives/EMIS-Report-Explanationsand-Validations/FY13-EMIS-Validation-and-Report-Explanation-Docume .

For fiscal year 2013, “general expenditures” include expenditures from the General Fund (001), 016, Poverty Aid (494), and EdJobs

Fund (504). If the LEA operates a Schoolwide Pool, the LEA should also include the percentage of state and local funds included in its Schoolwide Fund (598) as “general expenditures” (i.e., this means the LEA will need to identify the percentage of state and local revenues receipted in Fund 598 in order to prorate the portion of state and local expenditures included in the Schoolwide Fund).

LEA Treasurers extract the required data elements for the appropriate period from the USAS system that automatically is loaded into EMIS or they manually upload a file into the EMIS system to complete the

Period H report. All A-site consortiums, including NWOCA, receive a SAS 70/SOC audit. These reports are available in the AOS Internet Audit Search function. LEA auditors can use these reports to obtain assurances over the A-sites internal controls related to data files maintained in EMIS. However, there is still some risk of incomplete or inaccurate reporting at the LEA level (e.g., the LEA did not extract expenditure data for the appropriate time period from the includable EPP funds, functions, and objects, etc.).

1.

Request the EMIS Coordinator or other District-designated official to run the following EMIS Period H,

Financial Expenditure Per Pupil Categories (EPP) report for the fiscal year being tested ( 2013 ):



For FY13 and forward :

TXT_20XXH_FIN_EXPND_AMT_BY_CAT

(See example report on pg. 10/11

http://education.ohio.gov/getattachment/Topics/Data/EMIS/EMIS-Documentation/FY13-

of

EMIS-Validation-and-Report-Explanation-

Docume/Expnd_Amt_by_Cat_Report_Explanation.pdf.aspx

)

2. Select a few key totals, subtotals, and line-items and compare these amounts to the expenditures recorded in the underlying USAS accounting system.

3. Scan EMIS Period H reports to ensure they include only the following types of expenditures, which are allowable under the Expenditure Per Pupil Categories (EPP) (i.e., expenditures related to the direct education of a student).

(a) Allowable maintenance of effort expenditures include state and local funds for free public education (administration, instruction, attendance and health services, pupil transportation services, operation and maintenance of plant, fixed charges, and net expenditures to cover deficits for food services and student body activities) made in accordance with the Per Pupil

Categories (EPP).

(b) LEAs should exclude expenditures for community services, capital outlay, debt service, expenditures made as a fiscal agent, rotary, or supplemental expenses made as a result of a presidentially declared disaster and any expenditure made from funds provided by the

Federal government from the EMIS Period H Financial expenditure reports.




Note: Auditors may choose to coordinate their scanning procedures with testing of non-Federal nonpayroll transactions to ensure transactions were properly coded in accordance with the EPP. Our primary concern is whether unallowable transactions have been included, suggesting the LEA improperly reported expenditures from unallowable sources which could have been improperly included on ODE’s maintenance of effort computation.

2.2) Level of Effort – Supplement Not Supplant

a) Ascertain if the entity used Federal funds to provide services which they were required to make available under Federal, State, or local law and were also made available by funds subject to a supplement not supplant requirement. b) Ascertain if the entity used Federal funds to provide services which were provided with non-Federal funds in the prior year.

(1) Identify the federally funded services.

(2) Perform procedures to determine whether the Federal program funded services that were previously provided with non-Federal funds.

(3) Perform procedures to ascertain if the total level of services applicable to the requirement increased in proportion to the level of Federal contribution. c) If there is a presumption of supplanting for a transaction, evaluate the supporting documentation for rebutting the presumption.

3) Earmarking

a) Identify the applicable percentage or dollar requirements for earmarking. b) Perform procedures to verify that the amounts recorded in the financial records met the requirements (e.g., when a minimum amount is required to be spent for a specified type of service, perform procedures to verify that the financial records show at least the minimum amount for this type of service was charged to the program; or, when the amount spent on a specified type of service may not exceed a maximum amount, perform procedures to verify that the financial records show no more than this maximum amount for the specified type of service was charged to the program). c) When earmarking requirements specify a minimum percentage or amount, select a sample of transactions supporting the specified amount or percentage and perform tests to verify proper classification to meet the minimum percentage or amount. d) When the earmarking requirements specify a maximum percentage or amount, review the financial records to identify transactions for the specified activity which were improperly classified in another account (e.g., if only 10 percent may be spent for administrative costs, review accounts for other than administrative costs to identify administrative costs which were improperly classified elsewhere and cause the maximum percentage or amount to be exceeded).

(1) Transferability

(a) Ensure the LEAs not identified for improvement or corrective action under Section 1116 of

ESEA transferred 50 percent or less of each fiscal year’s funds from one or more of the listed applicable programs to another listed applicable program, or to Title I, Part A.

(b) Ensure the LEAs identified for improvement transferred 30 percent or less of their allocation base.

(c) Ensure LEAs identified for corrective action did not transfer funds.

(d) For funds transferred during a fiscal year’s carryover period, ensure the total amount transferred from the fiscal year’s allocation base does not exceed the maximum percentage.




(e) Ensure funds are transferred to the receiving program’s allocation for the same fiscal year that the funds were allocated to the transferring program. e) When earmarking requirements prescribe the minimum number or percentage of specified types of participants that can be served, select a sample of participants that are counted toward meeting the minimum requirement and perform testing to verify that they were properly classified. f) When earmarking requirements prescribe the maximum number or percentage of specified types of participants that can be served, select a sample of other participants and perform tests to verify that they were not of the specified type. Trace student count data to underlying documentation.









H. Period of Availability of Federal Funds (“Period of Performance” Elsewhere in the FACCR)



§___.500(c).

2) Determine whether Federal funds were obligated within the period of availability and obligations were liquidated within the required time period.


General

Federal awards may specify a time period during which the non-Federal entity may use the Federal funds. Where a funding period is specified, a non-Federal entity may charge to the award only costs resulting from obligations incurred during the funding period and any pre-award costs authorized by the Federal awarding agency. Also, if authorized by the

Federal program, unobligated balances may be carried over and charged for obligations of a subsequent funding period.

Obligations means the amounts of orders placed, contracts and subgrants awarded, goods and services received, and similar transactions during a given period that will require payment by the non-Federal entity during the same or a future period (A-102 Common Rule, §___.23; OMB Circular A-110 (2 CFR section 215.28)).

Non-Federal entities subject to the A-102 Common Rule shall liquidate all obligations incurred under the award not later than 90 days after the end of the funding period (or as specified in a program regulation The Federal agency may extend this deadline upon request (A-102 Common Rule, §___.23; OMB Circular A-110 (2 CFR section 215.71)).


The requirements for period of availability of Federal funds are contained in the A-102 Common Rule (§____.23), OMB

Circular A-110 (2 CFR sections 215.28 and 215.71), program legislation, Federal awarding agency regulations, and the terms and conditions of the award.


Definition of Obligation

- An obligation is not necessarily a liability in accordance with generally accepted accounting principles. When an obligation occurs (is made) depends on the type of property or services that the obligation is for (34

CFR section 76.707):

IF AN OBLIGATION IS FOR -- THE OBLIGATION IS MADE --

(a) Acquisition of real or personal property.

(b) Personal services by an employee of the State or subgrantee.

(c) Personal services by a contractor who is not an employee of the State or subgrantee.

On the date on which the State or subgrantee makes a binding written commitment to acquire the property.

When the services are performed.

On the date on which the State or subgrantee makes a binding written commitment to obtain the services.

(d) Performance of work other than personal services. On the date on which the State or subgrantee makes a binding written commitment to obtain the work.

(e) Public utility services.

(f) Travel.

(g) Rental of real or personal property.

When the State or subgrantee receives the services.

When the travel is taken.

When the State or subgrantee uses the property.

(h) A pre-agreement cost that was properly approved by the State under the applicable cost principles.

On the first day of the subgrant period.

The act of an SEA or other grantee awarding Federal funds to an LEA or other eligible entity within a State does not constitute an obligation for the purposes of this compliance requirement. An SEA or other grantee may not reallocate grant funds from one subrecipient to another after the period of availability ends.




If a grantee or subgrantee uses a different accounting system or accounting principles from one year to the next, it shall demonstrate that the system or principle was not improperly changed to avoid returning funds that were not timely obligated. A grantee or subgrantee may not make accounting adjustments after the period of availability ends in an attempt to offset audit disallowances. The disallowed costs must be refunded.

(Source: 2015 OMB Compliance Supplement, Part 4, Department of Education Cross-Cutting)


Funds not obligated by the end of the Federal fiscal year for which they were appropriated may be obligated for one additional Federal fiscal year. For example, funds appropriated for the Federal fiscal year 2014 are available from

October 1, 2013 (the beginning of Federal fiscal year 2014) until September 30, 2015 (Title III of Pub. L. No. 107-116,

School Improvement Programs, 115 Stat. 2202) plus an additional 12 months (34 CFR sections 76.707 through 76.709).


PROJECT DURATION - Approved grants will be funded for a five-year period contingent upon new and continued USDOE's annual appropriation to the state. Beginning if FY 14, the first year of the grant awarded will be considered implementation or “probationary year”. Additional monitoring requirements will be addressed during the year including program implementation timeline, adherence to the approved grant application, implementation of service, sustainability planning, and program effectiveness will determine the continuation of funding into subsequent years. Additionally, the first three years will be funded at 100 percent, and the fourth and fifth years will be funded at 75 percent and 50 percent, respectively.



)

In Ohio, programs included in ODE’s Consolidated Application have a project period starting with the application substantially approved date through June 30. Any carryover to the subsequent school district fiscal year must be approved by ODE. Additionally, any budget revisions contain a substantially approved date which coincides with the date the revision request was submitted to ODE. Activities may not commence from that budget revision prior to the substantially approved date.

Obligations must be liquidated prior to submitting the Final Expenditure Report, which must be filed no later than 90 days after the end of the project period. (Note: the 90 day requirement is only for CCIP projects. For those projects which use paper for reporting and application, the FER is due not later than 60 days after the end of the project period.) (ODE

Federal Fiscal Report Procedures #1 and ODE Superintendent Weekly E-mail, December 6, 2002)

Goods and services must also be received by the end of the liquidation period as well. ODE requires this to keep LEA’s from pre-paying obligations that may occur significant periods in advance.

Funds transferred to consolidated administrative cost pools and coordinated services projects are subject to the above requirements. Because expenditures in a consolidated administrative fund or a coordinated services project are not tracked by the Federal program, an LEA may use a first-in, first-out method for determining when funds were obligated, may attribute costs in proportion to the dollars provided, or may use another reasonable method.

Occasionally, ODE may extend the period of performance for summer programs in order to cover teacher salaries, etc. prior to the start of the next school year. Approval for this extension should be documented within CCIP. This action does not extend the FER due date to ODE.





The individual grant application, agreement, or policies may contain the specific requirements for period of performance of federal funds.

(Source: )






), perform procedures to obtain an understanding of internal control sufficient to plan the audit to support a low assessed level of control risk for the program. Plan the testing of internal control to support a low assessed level of control risk for Period of Performance and perform the testing of internal control as planned. If internal control over some or all of the compliance requirements is likely to be ineffective, see the alternative procedures in §___.500(c)(3) of OMB Circular A-133, including assessing the control risk at the maximum and considering whether additional compliance tests and reporting are required because of ineffective internal control. For further

2011.

AOS guidance on testing federal controls see http://portal/BP/Intranet/AA%20Training%20Fall%202011/FACCR%20Controls%20and%20Federal%20Update.pdf

– Fall








WP Ref.

1) Review the award documents and regulations pertaining to the program and determine any awardspecific requirements related to the period of availability and document the availability period.

2) Test transactions charged to the Federal award after the end of the period of availability to verify that the – a.

underlying obligations occurred within the period of availability, and

liquidation (payment) was made within the allowed time period. b.

3) Test transactions that were recorded during the period of availability and verify that the underlying obligations occurred within the period of availability.

4) Test adjustments (i.e., manual journal entries) to the Federal funds and verify that the adjustments were for transactions that occurred during the period of availability.

As long as the auditor obtains sufficient, appropriate evidence to meet the period of availability audit objectives, the auditor may test period of availability using the same test items used to test other types of compliance requirements (e.g., activities allowed or unallowed or allowable costs/cost principles).

However, if this approach is used, the auditor should exercise care in designing the sample to ensure that sample items are suitable for testing the stated objectives of compliance requirements covered by the sample.

Audit Implications (adequacy of the system and controls, and the effect on sample size, significant



H. Period of Availability of Federal Funds (“Period of Performance” Elsewhere in the FACCR) deficiencies / material weaknesses, and management letter comments)








I. Procurement and Suspension and Debarment – Not Applicable

 Per 2015 OMB A-133 Compliance Supplement, Part 2.



J. Program Income



§___.500(c).

2) Determine whether program income is correctly determined, recorded, and used in accordance with the program requirements, A-102 Common Rule, and OMB Circular A-110, as applicable.


General

Program income is gross income received that is directly generated by the federally funded project during the grant period. If authorized by Federal regulations or the grant agreement, costs incident to the generation of program income may be deducted from gross income to determine program income. Program income includes, but is not limited to, income from fees for services performed, the use or rental of real or personal property acquired with grant funds, the sale of commodities or items fabricated under a grant agreement, and payments of principal and interest on loans made with grants funds. Except as otherwise provided in the Federal awarding agency regulations or terms and conditions of the award, program income does not include interest on grant funds (covered under “Cash

Management”), rebates, credits, discounts, refunds, etc. (covered under “Allowable Costs/Cost Principles”), or interest earned on any of them (covered under “Cash Management”). Program income does not include the proceeds from the sale of equipment or real property (covered under “Equipment and Real Property Management”).

Program income may be used in one of three methods: deducted from outlays, added to the project budget, or used to meet matching requirements. Unless specified in the Federal awarding agency regulations or the terms and conditions of the award, program income shall be deducted from program outlays. However, for research and development activities by institutions of higher education, hospitals, and other non-profit organizations, the default method is to add program income to the project budget. Unless Federal awarding agency regulations or the terms and conditions of the award specify otherwise, non-Federal entities have no obligation to the Federal Government regarding program income earned after the end of the grant period.


The requirements for program income are found in the A-102 Common Rule (§____.21 (payment) and §____.25

(program income)); OMB Circular A-110 (2 CFR section 215.2 (program income definition), 2 CFR section 215.22

(payment), and 2 CFR section 215.24 (program income)), program legislation, Federal awarding agency regulations, and the terms and conditions of the award.



The individual grant application, agreement, or policies may contain the specific requirements for program income.

(Source: )




), or GAO’s 2014 Green

Book ( http://www.gao.gov/assets/670/665712.pdf

), perform procedures to obtain an understanding of internal control sufficient to plan the audit to support a low assessed level of control risk for the program. Plan the testing of internal control to support a low assessed level of control risk for Program Income and perform the testing of internal control as planned. If internal control over some or all of the compliance requirements is likely to be ineffective, see the alternative procedures in §___.500(c)(3) of OMB Circular A-133, including assessing the control risk at the maximum and considering whether additional compliance tests and reporting are required because of ineffective internal control.

For

Fall 2011. further AOS guidance on testing federal controls see http://portal/BP/Intranet/AA%20Training%20Fall%202011/FACCR%20Controls%20and%20Federal%20Update.pdf

–



J. Program Income

What control procedures address the compliance requirement?






Note: Consider the results of the testing of internal control in assessing the risk of noncompliance.

Use this as the basis for determining the nature, timing, and extent (e.g., number of transactions to be selected) of substantive tests of compliance.

WP Ref.

WP Ref.

These procedures may require some tailoring if specific program income requirements were identified above.

1)

2)

Identify Program Income

a) Review the laws, regulations, and the provisions of contract or grant agreements applicable to the program and ascertain if program income was anticipated. If so, ascertain the requirements for determining or assessing the amount of program income (E.g., a scale for determining user fees, prohibition of assessing fees against certain groups of individuals, etc.), and the requirements for recording and using program income. b) Inquire of management and review accounting records to ascertain if program income was received.

Determining or Assessing Program Income

– Perform tests to verify that program income was properly determined or calculated in accordance with stated criteria, and that program income was only collected from allowable sources.

3)

Recording of Program Income

– Perform tests to verify that all program income was properly recorded in the accounting records.

4)

Use of Program Income

- Perform tests to ascertain if program income was used in accordance with the program requirements, the A-102 Common Rule, and OMB Circular A-110.


A.

Results of Test of Controls: (including material weaknesses, significant deficiencies and management letter items)

B.

Assessment of Control Risk:

C.

Effect on the Nature, Timing, and Extent of Compliance (Substantive Test) including Sample Size:

D.

Results of Compliance (Substantive Tests) Tests:

E.

Questioned Costs: Actual __________ Projected __________



K. RESERVED

 In the 2015 Supplement, OMB has removed several of the compliance requirements that previously were required to be tested across all programs, when applicable. The compliance requirements that were removed are Davis-Bacon Act (now applicable only for specified programs as a “special test or provision”); Relocation and Real Property Assistance; and, within Reporting, Subaward Reporting under the Federal Funding

Accountability and Transparency Act. As with any other change in a compliance requirement, if there was a finding(s) in any of these areas in audits conducted using the 2014 Supplement, those findings must continue to be reported in the summary schedule of prior audit findings and the corrective action plan, as provided in

OMB Circular A-133 §_.315/2 CFR section 200.511, and be considered in the assessment of risk under OMB

Circular A-133 §_.525(b)/2 CFR section 200.519(b). (Source: 2015 OMB Compliance Supplement, Appendix

VII)



L. Reporting



§___.500(c).

2) Determine whether required reports for Federal awards include all activity of the reporting period, are supported by applicable accounting or performance records, and are fairly presented in accordance with program requirements.


General

For purposes of the Supplement, the designation “Not Applicable” in relation to “Financial Reporting,” “Performance

Reporting” and “Special Reporting” means that the auditor is not expected to audit anything in these categories whether or not award terms and conditions may require such reporting.

1. Financial Reporting

Recipients should use the standard financial reporting forms or such other forms as may be authorized by OMB (approval is indicated by an OMB paperwork control number on the form). Each recipient must report program outlays and program income on a cash or accrual basis, as prescribed by the Federal awarding agency. If the Federal awarding agency requires reporting of accrual information and the recipient’s accounting records are not normally maintained on the accrual basis, the recipient is not required to convert its accounting system to an accrual basis but may develop such accrual information through analysis of available documentation. The Federal awarding agency may accept identical information from the recipient in machine-readable format, computer printouts, or electronic outputs in lieu of the prescribed formats.

The financial reporting requirements for subrecipients are as specified by the pass-through entity. LEAs and other subrecipients are generally required to report financial information to the pass-through entity. These reports should be tested during audits of LEAs.

State of Ohio

All performance reports and other reports required as a condition of the grant, must be submitted to ODE within 90 days or the required due date set by ODE after the termination of the grant [34 CFR 80.50 of EDGAR]. This would include submission data required for the required Final Expenditure Report (FER).

(Source: ODE 21 st CLCC Grant Closing Guidelines, Reports available http://education.ohio.gov/getattachment/Topics/Other-Resources/21st-Century/21st-CCLC-Archived-Eventat:

Information/Close-Out-Procedures.pdf.aspx

)

Consolidated Application Assurances item 5 provides, that LEA’s will make reports to ODE as may be reasonably necessary to enable ODE to perform its duties. Program funds are reported to the State of Ohio. There are two forms the Auditor should consider:

- Project cash request (tested in section C. Cash Management)

- Final expenditure report

The final expenditure report is to be submitted for each project immediately after all financial obligations have been

liquidated. The report is due no later than 90 days after the end of the project period, for programs contained in the

CCIP. The FER is due not later than 60 days after the end of the project period, for programs applied for using a paper process. Failure to submit the report in a timely manner may result in a temporary suspension of the flow of federal funds for this grant until the project is closed.



L. Reporting

Actual expenditures authorized by the approved project application and charges to the project special cost center are to be reported (report amounts actually expended, not encumbered) 4 .

This report must be submitted before approval can be given to use the unexpended portion of the allocation as carryover funds.

(Source: ODE Federal Fiscal Report Procedures #1 and ODE Superintendent Weekly E-mail, December 6, 2002)

The Ohio Department of Education’s CCIP Final Expenditure Report Completion Steps, states all CCIP Final Expenditure

Reports (FERs) must be completed online and may be started after June 30th, the end of the fiscal year. In addition, each

Funding Application within the CCIP has its own separate final expenditure report. Each Local Education Agency (LEA) must ensure each FER(s) is submitted to ODE with Superintendent Approval no later than September 30.

( https://ccip.ode.state.oh.us/documentlibrary/ViewDocument.aspx?DocumentKey=69613 )

10% RULE – Entities may expend up to 10% more than approved in the budget for an OBJECT CODE TOTAL without submitting a budget revision (e.g., the total amount approved for salaries, object code 100, is $1,000.00 – entities may spend up to $1,100.00). This authority does not permit unauthorized expenditures. (34 CFR 80.30 and ODE Final

Expenditure Report Instructions available at: http://www.ode.state.oh.us/GD/Templates/Pages/ODE/ODEDetail.aspx?page=3&TopicRelationID=87&ContentID=4465&

Content=129166 )

32 CFR 80.41(a) states (1) Except as provided in paragraphs (a) (2) and (5) of this section, grantees will use only the forms specified in paragraphs (a) through (e) of this section, and such supplementary or other forms as may from time to time be authorized by OMB, for: (i) Submitting financial reports to Federal agencies, or (ii) Requesting advances or reimbursements when letters of credit are not used.

(2) Grantees need not apply the forms prescribed in this section in dealing with their subgrantees. However, grantees shall not impose more burdensome requirements on subgrantees

.

2. Performance Reporting – Not Applicable (per US Dept. of Ed. cross-cutting requirements below)

3. Special Reporting – Not Applicable (per US Dept. of Ed. Part 4 compliance requirements)

Note: The 2015 OMB Compliance Supplement deleted coverage of the subaward reporting requirements under the

Federal Funding Accountability and Transparency Act (FFATA).


Reporting requirements are contained in the following documents: a. A-102 Common Rule - Financial reporting, §____.41; Performance reporting, §___.40(b). b. OMB Circular A-110 - Financial reporting, 2 CFR section 215.52 (this section has not been updated to reference the new form); Performance reporting, 2 CFR section 215.51. c. Program legislation. d. Federal awarding agency regulations. e. The terms and conditions of the award.



4 For programs contained in the CCIP, the report should reflect amounts actually expended, including obligations liquidated within 90 days of the end of the project period (60 days for paper projects), not obligations encumbered but unliquidated.



L. Reporting

US Department of Education Cross-Cutting & Program Specific Requirements:

1. Financial Reporting

ESEA programs in this Supplement to which this section applies are: Title I, Part A (84.010); MEP (84.011); CSP

(84.282); 21st CCLC (84.287

); Title III, Part A (84.365); MSP (84.366); Title II, Part A (84.367); and SIG (84.377 and 84.388)

.

This section also applies to IDEA (84.027 and 84.173); IDEA, Part C (84.181); and RTT (84.395)

.

a. SF-270, b. SF-271, c. SF-425,

Request for Advance or Reimbursement

Federal Financial Report

d. Form 270,

Monitoring 2 by ED

2. Performance Reporting – Not Applicable

– Applicable (using the G5 System)

Outlay Report and Request for Reimbursement for Construction Programs

– Not Applicable

– Not Applicable

Request for Title IV Reimbursement or Heightened Cash Monitoring 2 (HCM2)

(

OMB No.

1845-

0089) – Applicable only to institutions placed on reimbursement payment method or Heightened Cash

3. Special Reporting – Not Applicable


The individual grant application, agreement, or policies may contain the specific requirements for reporting.

(Source: )






), perform procedures to obtain an understanding of internal control sufficient to plan the audit to support a low assessed level of control risk for the program. Plan the testing of internal control to support a low assessed level of control risk for Reporting and perform the testing of internal control as planned.

If internal control over some or all of the compliance requirements is likely to be ineffective, see the alternative procedures in §___.500(c)(3) of OMB Circular A-133, including assessing the control risk at the maximum and considering whether additional compliance tests and reporting are required because of ineffective internal control. For further AOS guidance

2011. on testing federal controls see http://portal/BP/Intranet/AA%20Training%20Fall%202011/FACCR%20Controls%20and%20Federal%20Update.pdf

– Fall



Control Procedure (description of how auditee uses the “Basis” to prevent, or identify and

WP Ref. correct or detect errors):





Use this as the basis for determining the nature, timing, and extent (e.g., number of transactions

WP Ref.



L. Reporting to be selected) of substantive tests of compliance.

1) Review applicable laws, regulations, and the provisions of contract or grant agreements pertaining to the program for reporting requirements. Document the types and frequency of required reports. Obtain and review Federal awarding agency, or pass-through entity in the case of a subrecipient, instruction for completing the reports.

For financial reports, ascertain the accounting basis used in reporting the data (e.g., cash a) or accrual). b) For performance and special reports, determine the criteria and methodology used in compiling and reporting the data.

2) Perform appropriate analytical procedures and ascertain in the reason for any unexpected differences. Examples of analytical procedures include: a) Comparing current period reports to prior period reports. b) Comparing anticipated results to the data included in the reports. c) Comparing information obtained during the audit of the financial statements to the reports.

Note: The results of the analytical procedures should be considered in determining the nature, timing, and extent of other audit procedures for reporting.

3) Select a sample of each of the following report types:

Financial reports a)

(1) Ascertain if the financial reports were complete, accurate, and prepared in accordance with the required accounting basis.

(2) Trace the amounts reported to accounting records that support the audited financial statements and the Schedule of Expenditures of Federal Awards and verify agreement or perform alternative procedures to verify the accuracy and completeness of the reports and that they agree with the accounting records. If reports require information on an accrual basis and the entity does not prepare its accounting records on an accrual basis, determine whether the reported information is supported by available documentation.

(3) For any discrepancies noted in SF-425 reports concerning cash status when the advance payment method is used, review subsequent SF-425 reports to ascertain if the discrepancies were appropriately resolved with the applicable payment system.

(4) Review accounting records and ascertain if all applicable accounts were included in the sampled reports (e.g., program income, expenditure credits, loans, interest earned on

Federal funds, and reserve funds).

(5) Determine whether the amounts reported are within 10% of the budgeted amounts?

(See Section III – Program Specific Information; Section C – Cash Management; and the information in Section L above)

(6) Determine whether amounts reported were only those amounts actually expended during the report period, including obligations liquidated within 90 days of the report period (i.e., encumbrances should not be included).

(7) Determine whether the report was submitted within 90 days after the end of the project period.



L. Reporting

(8) Determine whether the amounts reported liquidated within the period of performance

(see section H)

.

(9) When intervening computations or calculations are required between the records and the reports, trace reported data elements to supporting worksheets or other documentation that link reports to the data.

(10) Test mathematical accuracy of reports and supporting worksheets. b) Performance and special reports – Not Applicable

4) Obtain written representation from management that the reports provided to the auditor are true copies of the reports submitted or electronically transmitted to the Federal awarding agency, the applicable payment system, or pass-through entity in the case of a subrecipient.


A.


B.


C.


D.


E.




M. Subrecipient Monitoring

Subrecipient Monitoring is generally not expected to apply at the LEA level. However, if the LEA has subrecipients the requirements would apply. When an LEA does have subrecipients, auditors should look for the grantor’s written approval of the subrecipient agreement.



§___.500(c).

2) For non-ARRA first-tier subawards made on or after October 1, 2010, determine whether the pass-through entity had the subrecipient provide a valid DUNS number before issuing the subaward.

3) Determine whether the pass-through entity properly identified Federal award information and compliance requirements to the subrecipient, and approved only allowable activities in the subaward documents.

4) Determine whether the pass-through entity monitored subrecipient activities to provide reasonable assurance that the subrecipient administers Federal awards in compliance with Federal requirements and achieves performance goals.

5) Determine whether the pass-through entity ensured required audits are performed, issued a management decision on audit findings within 6 months after receipt of the subrecipient’s audit report, and ensured that the subrecipient took timely and appropriate corrective action on all audit findings.

6) Determine whether in cases of continued in ability or unwillingness of a subrecipient to have the required audits, the pass-through entity took appropriate action using sanctions.

7) Determine whether the pass-through entity evaluated the impact of subrecipient activities on the pass-through entity.

8) Determine whether the pass-through entity identified in the Schedule of Expenditures of Federal Awards (SEFA) the total amount provided to subrecipients from each Federal program.

9) If for-profit subawards are material, determine the adequacy of the pass-through entity’s monitoring procedures for those subawards.


Note: Transfers of Federal awards to another component of the same auditee under

OMB Circular A-133 do not constitute a subrecipient or vendor relationship.

A pass-through entity is responsible for:



Determining Subrecipient Eligibility

– In addition to any programmatic eligibility criteria under E, “Eligibility for

Subrecipients,” determining whether an applicant for a subaward has provided a Dun and Bradstreet Data Universal

Numbering System (DUNS) number as part of its subaward application or, if not, before award (2 CFR section

25.110 and Appendix A to 2 CFR part 25).





Award Identification

– At the time of the subaward, identifying to the subrecipient the Federal award information

(i.e., CFDA title and number; award name and number; if the award is research and development; and name of

Federal awarding agency) and applicable compliance requirements.

During-the-Award Monitoring

– Monitoring the subrecipient’s use of Federal awards through reporting, site visits, regular contact, or other means to provide reasonable assurance that the subrecipient administers Federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved.







Subrecipient Audits

– (1) Ensuring that subrecipients expending $500,000 or more in Federal awards during the subrecipient’s fiscal year for fiscal years ending after December 31, 2003 as provided in OMB Circular A-133 have met the audit requirements of OMB Circular A-133 (the circular is available at

 http://www.whitehouse.gov/omb/circulars/a133/a133.html

) and that the required audits are completed within 9 months of the end of the subrecipient’s audit period; (2) issuing a management decision on audit findings within 6 months after receipt of the subrecipient’s audit report; and (3) ensuring that the subrecipient takes timely and appropriate corrective action on all audit findings. In cases of continued inability or unwillingness of a subrecipient to have the required audits, the pass-through entity shall take appropriate action using sanctions.

Ensuring Accountability of For-Profit Subrecipients

– Awards also may be passed through to for-profit entities. Forprofit subrecipients are accountable to the pass-through entity for the use of Federal funds provided. Because forprofit subrecipients are not subject to the audit requirements of OMB Circular A-133, pass-through entities are

 responsible for establishing requirements, as needed, to ensure for-profit subrecipient accountability for the use of funds.

Pass-Through Entity Impact

– Evaluating the impact of subrecipient activities on the pass-through entity’s ability to comply with applicable Federal regulations.

During-the-Award Monitoring





Following are examples of factors that may affect the nature, timing, and extent of during-the-award monitoring:





Program complexity

– Programs with complex compliance requirements have a higher risk of noncompliance.

Percentage passed through

for subrecipient monitoring.

– The larger the percentage of program awards passed through the greater the need

Amount of awards

– Larger dollar awards are of greater risk.

Subrecipient risk

– Subrecipients may be evaluated as higher risk or lower risk to determine the need for closer monitoring. Generally, new subrecipients would require closer monitoring. For existing subrecipients, based on results of during-the-award monitoring and subrecipient audits, a subrecipient may warrant closer monitoring (e.g., if the subrecipient has (1) a history of noncompliance as either a recipient or subrecipient, (2) new personnel, or

(3) new or substantially changed systems). Evaluation of subrecipient risk also may take into consideration the extent of Federal monitoring of subrecipient entities that also are recipients of prime Federal awards.



Monitoring activities normally occur throughout the year and may take various forms, such as:



Reporting

– Reviewing financial and performance reports submitted by the subrecipient.

Site Visits

– Performing site visits at the subrecipient to review financial and programmatic records and observe operations.

Regular Contact

– Regular contacts with subrecipients and appropriate inquiries concerning program activities. 

Agreed-upon procedures engagements

A pass-through entity may arrange for agreed-upon procedures engagements for certain aspects of subrecipient activities, such as eligibility determinations. Since the pass-through entity determines the procedures to be used and compliance areas of greatest risk. The costs of agreed-upon procedures engagements is an allowable cost to the passthrough entity if the agreed-upon procedures are performed for subrecipients below the A-133 threshold for audit

(currently at $500,000 for fiscal years ending after December 31, 2003) for the following types of compliance requirements: activities allowed or unallowed; allowable costs/cost principles; eligibility; matching, level of effort, earmarking; and reporting (OMB Circular A-133 (§___.230(b)(2)).






The requirements for subrecipient monitoring are contained in 31 USC 7502(f)(2)(B) (Single Audit Act Amendments of

1996 (Pub. L. No. 104-156)); OMB Circular A-133 (§___.225, §___.310(d)(5), and §___.400(d)); A-102 Common Rule

(§___.37 and §___.40(a)); OMB Circular A-110 (2 CFR section 215.51(a)); program legislation; 2 CFR parts 25 and

170; 48 CFR parts 4, 42, and 52; Federal awarding agency regulations, and the terms and conditions of the award.



The individual grant application, agreement, or policies may contain the specific requirements for subrecipient monitoring.

(Source: )






), perform procedures to obtain an understanding of internal control sufficient to plan the audit to support a low assessed level of control risk for the program. Plan the testing of internal control to support a low assessed level of control risk for Subrecipient Monitoring and perform the testing of internal control as planned. If internal control over some or all of the compliance requirements is likely to be ineffective, see the alternative procedures in §___.500(c)(3) of OMB Circular A-133, including assessing the control risk at the maximum and considering whether additional compliance tests and reporting are required because of ineffective internal control.

For

Fall 2011. further AOS guidance on testing federal controls see http://portal/BP/Intranet/AA%20Training%20Fall%202011/FACCR%20Controls%20and%20Federal%20Update.pdf

–



Control Procedure (description of how auditee uses the “Basis” to prevent, or identify and correct or

WP Ref. detect errors):






Note: The auditor may consider coordinating the tests related to subrecipients performed as part of

Cash management (tests of cash reporting submitted by subrecipients), Eligibility (tests that subawards were made only to eligible subrecipients), and Procurement (tests ensuring that a subrecipients is not suspended or debarred) with the testing of Subrecipient Monitoring.

1. Gain an understanding of the pass-through entity’s subrecipient procedures through a review of the pass-through entity’s subrecipient monitoring policies and procedures (e.g., annual monitoring plan)

WP Ref.





and discussions with staff. This should include an understanding of the scope, frequency, and timeliness of monitoring activities and the number, size, and complexity of awards to subrecipients, including, as applicable, subawards to for-profit entities.

2. Test the pass-through entity’s subaward review and approval documents for first-tier subawards to ascertain if the pass-through entity obtained DUNS numbers from non-ARRA subrecipients prior to issuance of the subaward.

3. Test subaward documents and agreements to ascertain if (a) at the time of subaward the passthrough entity made subrecipients aware of the award information (i.e., CFDA title and number; award name and number; if the award is research and development; and name of Federal awarding agency) and requirements imposed by laws, regulations, and the provisions of contract or grant agreements; and (b) the activities approved in the subaward documents were allowable.

4. Review the pass-through entity’s documentation of during-the-subaward monitoring to ascertain if the pass-through entity’s monitoring provided reasonable assurance that subrecipients used Federal awards for authorized purposes, complied with laws, regulations, and the provisions of contracts and grant agreements, and achieved performance goals.

5. Review the pass-through entity’s follow-up procedures to determine whether corrective action was implemented on deficiencies noted in during-the-subaward monitoring.

6. Verify that the pass-through entity:

 Ensured that the required subrecipient audits were completed. For subrecipients that are not required to submit a copy of the reporting package to a pass-through entity because there were “no audit findings” the pass-through entity may use the information in the Federal Audit Clearinghouse (FAC) database (available at http://harvester.census.gov/sac ) as evidence to verify that the subrecipient had “no audit findings” and that the required audit was performed. This FAC verification would be in lieu of reviewing submissions by the subrecipient to the pass-through entity

(pursuant to A-133 §___320(e)(2)) when there are no audit findings.

 Issued management decisions on audit findings within 6 months after receipt of the subrecipient’s audit report.

 Ensured that subrecipients took appropriate and timely corrective action on all audit findings.

7. Verify that in cases of continued inability or unwillingness of a subrecipient to have the required audits, the pass-through entity took appropriate action using sanctions.

8. Verify that the effects of subrecipient noncompliance are properly reflected in the pass-through entity’s records.

9.

Verify that the pass-through entity monitored the activities of subrecipients not subject to OMB

Circular A-133, including for-profit entities, using techniques such as those discussed in the

“Compliance Requirements” provisions of this section with the exception that these subrecipients are not required to have audits under OMB Circular A-133. Review the pass-through entity’s followup procedures to determine whether corrective action was implemented on deficiencies noted





during-the-subaward monitoring.

10. Determine if the pass-through entity has procedures that allow it to identify the total amount provided to subrecipients from each Federal program.


A.


B.


C.


D.


E.




N. Special Tests and Provisions – Participation of Private School Children (LEAs)



§___.500(c).

2) Determine whether (1) the LEA, SEA, or other agency receiving ESEA funds has conducted timely consultation with private school officials to determine the kind of educational services to provide to eligible private school children,

(2) the planned services were provided, and (3) the required amount was used for private school children.



(84.287

); Title III, Part A (84.365); MSP (84.366); and Title II, Part A (84.367)

.

Depending on how the SEA/LEA implements requirements for the provision of equitable participation of private school children, this requirement may be tested on a general or program-specific basis (as described in II, “Program

Procedures – General and Program-Specific Cross-Cutting Requirements”).

Compliance Requirements – For programs funded under Title I, Part A (CFDA 84.010), an LEA, after timely and meaningful consultation with private school officials, must provide equitable services to eligible private school children, their teachers, and their families. Eligible private school children are those who reside in a participating public school attendance area and have educational needs under Section 1115(b) of the ESEA (20 USC 6315(b)). Title I, Part A funds must be allocated to each participating public school attendance area on the basis of the total number of children from low-income families residing in that area. In calculating the total number of children from low-income families, an

LEA must include children from low-income families who attend private schools. An LEA must use the portion of Title I,

Part A funds attributable to private school children from low-income families included in the calculation to provide services to eligible private school children. For example, if $100,000 of Title I, Part A funds are allocated based on 100 children from low-income families, 25 of whom are private school children, $25,000 of the $100,000 must be expended to provide equitable services to eligible private school children.

If an LEA reserves funds off the top of its Title I, Part A allocation to provide instructional and related activities for public school students at the district level, the LEA must also provide from those funds, as applicable, equitable services to eligible private school students. From applicable funds reserved for parent involvement and professional development, an LEA must ensure that teachers and families of participating private school children have an equitable opportunity to participate in professional development and parent involvement activities, respectively. The amount of funds available to provide these services must be proportionate to the number of private school children from lowincome families residing in participating public school attendance areas (Sections 1113(c) and 1120 of ESEA (20 USC

6313(c) and 6320); 34 CFR sections 200.62 through 200.67 and 200.77 through 200.78).

For all other programs, an SEA, LEA, or other eligible entity (or consortium of such entities) receiving financial assistance under an applicable program must provide eligible private school children and their teachers or other educational personnel with equitable services or other benefits under the program. Before an agency or consortium makes any decision that affects the opportunity of eligible private school children, teachers, and other educational personnel to participate, the agency or consortium must engage in timely and meaningful consultation with private school officials. Expenditures for services and benefits to eligible private school children and their teachers and other educational personnel must be equal on a per-pupil basis to the expenditures for participating public school children and their teachers and other educational personnel, taking into account the number and educational needs of the children, teachers and other educational personnel to be served (Sections 5142 and 9501 of ESEA (20 USC 7217a and

7881); 34 CFR sections 299.6 through 299.9).

The control of funds used to provide equitable services to eligible private school students, teachers and other educational personnel, and families, and title to materials, equipment, and property purchased with those funds must be in a public agency and the public agency must administer the funds, materials, equipment, and property. The provision of equitable services must be by employees of a public agency or through a contract by the public agency with an individual, association, agency, or organization that is independent of any private school or religious organization. The contract must be under the control of the public agency (Sections 1120(d), 5142(c), and 9501(d) of




ESEA (20 USC 6320(d), 7217a(c) and 7881(d); 34 CFR sections 200.67 and 299.9).

This compliance requirement also applies to Transferability (See III.A.3, “Activities Allowed or Unallowed –

Transferability (SEAs and LEAs)”) for transfers made by

21st CCLC (84.287

) and Title II, Part A (84.367)

(Section

6123(e)(2) of ESEA (20 USC 7305b(e)(2))).


See ODE’s “Nonpublic School Service Questions and Answers” for further info - https://ccip.ode.state.oh.us/DocumentLibrary/ViewDocument.aspx?DocumentKey=57882 .






), perform procedures to obtain an understanding of internal control sufficient to plan the audit to support a low assessed level of control risk for the program. Plan the testing of internal control to support a low assessed level of control risk for Special Tests and Provisions – Participation of Private School

Children and perform the testing of internal control as planned. If internal control over some or all of the compliance requirements is likely to be ineffective, see the alternative procedures in §___.500(c)(3) of OMB Circular A-133, including assessing the control risk at the maximum and considering whether additional compliance tests and reporting are required because of ineffective internal control. For further AOS guidance on testing federal controls see http://portal/BP/Intranet/AA%20Training%20Fall%202011/FACCR%20Controls%20and%20Federal%20Update.pdf

–

Fall 2011.



WP Ref.




WP Ref. Suggested Audit Procedures – Compliance (Substantive Tests)


Use this as the basis for determining the nature, timing, and extent (e.g., number of transactions to be selected) of substantive tests of compliance. a. Verify, by reviewing minutes of meetings and other appropriate documents, that the SEA or LEA conducted timely consultation with private school officials in making its determinations and set aside the required amount for private school children. b. Review program expenditure and other records to verify that educational services that were planned were provided. c. For Title I, Part A, verify that:

(1) The per pupil allocation (PPA) generated by private school children from low-income families living in participating public school attendance areas is equal to the PPA generated by public school children from low-income families living in the same attendance areas:

(2) Funds to provide equitable services to private school students were available, as applicable, from funds, if any, reserved off the top of the LEA’s Part A allocation for instructional and related activities at the district level; and




(3) Funds to provide equitable services to teachers and families of participating private school students were available from reservations of funds for professional development and parent involvement. d. If the LEA provides services to eligible private school students under an arrangement with a thirdparty provider, verify that the LEA retains proper administration and control by having a written contract that:

(1) Describes the services to be provided; and

(2) Provides that the LEA retains ownership of materials, equipment, and property purchased with Federal I funds. e. For programs other than Title I, Part A, verify that expenditures are equal on a per-pupil basis for public and private school students, teachers and other educational personnel, taking into consideration their numbers and needs as required by 34 CFR section 299.7.


A.


B.


C.


D.


E.




N. Special Tests and Provisions – Schoolwide Programs (LEAs)



§___.500(c).

2) (LEA) – Determine whether (1) the schools operating schoolwide programs were eligible to do so, (2) the schoolwide programs included the core elements and components, (3) funds included in the schoolwide program were used to address specific educational needs that the school identified in the needs assessment and that were articulated in the schoolwide plan, and (4) the annual evaluation of the results achieved by the schoolwide program and revision of the schoolwide plan based on that evaluation were completed.



(84.287

); Title III, Part A (84.365); MSP (84.366); Title II, Part A (84.367); and SIG (84.377 and 84.388)

.

This section also applies to IDEA (84.027 84.173) and CTE (84.048).

As described in Part II, “Program Procedures – General and Program-Specific Cross-Cutting Requirements,” this requirement is a general cross-cutting requirement that only needs to be tested once to cover all major programs to which it applies.

Compliance Requirements – A school participating under Title I, Part A may, in consultation with its LEA, use its

Title I, Part A funds, along with funds provided from the above-identified programs and other Federal, State, and local education funds, to upgrade the school’s entire educational program in a schoolwide program. At least 40 percent of the children enrolled in the school or residing in the school attendance area for the initial year of the schoolwide program must be from low-income families. The LEA is required to maintain records to demonstrate compliance with this requirement. [Note: For the SIG program (CFDA 84.377 and CFDA 84.388), 49 SEAs were granted a waiver to allow a school with less than 40 percent low-income children to operate a schoolwide program as part of implementing one of four school intervention models. Similarly, in a State that has received ESEA flexibility [See Section II, Program

Procedures, ESEA Flexibility] , the SEA was granted a waiver to allow a Title I, Part A school with less than 40 percent low-income children to operate a schoolwide program if (a) the SEA identified the school as a priority school or a focus school and (b) the LEA is implementing interventions consistent with the turnaround principles or interventions that are based on the needs of the students in the school and designed to enhance the entire educational program in the school.

a. To operate a schoolwide program, a school must include the following three core elements:

(1) Comprehensive needs assessment of the entire school (34 CFR section 200.26(a)).

(2) Comprehensive plan based on data from the needs assessment (34 CFR section 200.26(b)).

(3) Annual evaluation of the results achieved by the schoolwide program and revision of the schoolwide plan based on that evaluation (34 CFR section 200.26(c)). b. A schoolwide plan also must include the following components:

(1) Schoolwide reform strategies (34 CFR section 200.28(a)).

(2) Instruction by highly qualified professional staff (34 CFR section 200.28(b)).

(3) Strategies to increase parental involvement (34 CFR section 200.28(c)).

(4) Additional support to students experiencing difficulty (34 CFR section 200.28(d)).

(5) Transition plans for assisting preschool children in the successful transition to the schoolwide program (34

CFR section 200.28(e)). c. A schoolwide program school that consolidates Federal, State, and local funds in a consolidated schoolwide pool may use those funds for any activity in the school. (Consolidating funds in a schoolwide program means that a school treats the funds like they are a single ”pool” of funds--i.e., the funds lose their individual identity and the school has one flexible pool of funds.) However, the school still must ensure that funds from the schoolwide pool are used to address the specific educational needs of the school identified by the needs assessment and articulated in the schoolwide plan. An ED

Federal Register

notice, dated July 2, 2004 (69 FR




40360-40365), indicates which Federal program funds may be consolidated in a schoolwide program. The school is not required to maintain separate records that identify by program the specific activities supported by those funds. Also, the school is not required to meet most of the statutory and regulatory requirements of the

Federal programs included in the consolidation as long as it meets the intent and purposes of those programs.

See AOS Bulletin 2007-003 – as of Fy 15 there were only 29 Districts in Ohio using this schoolwide option.

If a schoolwide program school consolidates just its Federal funds in a single Federal consolidated schoolwide pool , the school must use those funds to address specific educational needs of the school identified by the needs assessment and articulated in the schoolwide plan. Although the Federal funds lose their specific program identity and may be accounted for as part of the pool, the school must keep records to demonstrate that the consolidated funds support activities that address the intent and purpose of each program. With the exception of discretionary programs as noted below, the school is not required to meet most of the statutory and regulatory requirements of the specific Federal programs included in the consolidation as long as it meets the intent and purposes of those programs. In Ohio, no schools currently do this, as ODE does not give it as an option.

If a schoolwide program school does not consolidate its Federal funds, the school must use Title I, Part A funds to support activities that address specific educational needs of the school identified by the needs assessment and articulated in the schoolwide plan. The school must use other Federal funds in accordance with the specific requirements of each Federal program. For more detail on consolidating funds in schoolwide program schools, see pages 49-67 in guidance entitled

Title I Fiscal Issues: Maintenance of Effort; Comparability;

Supplement, not Supplant; Carryover; Consolidating Funds in Schoolwide Programs; and Grantback

Requirements

(February rather than clicking on the link.]

2008). This guidance is available at http://www.ed.gov/programs/titleiparta/fiscalguid.doc

). [NOTE: You should copy and paste this web address, d. If a schoolwide program school consolidates funds, the school must ensure that its schoolwide program addresses the needs of children who are members of the target population of any Federal program whose funds are consolidated. Specific requirements apply to these programs as follows:

(1) Before consolidating funds or services received under MEP, a schoolwide program must (a) in consultation with parents of migratory children or organizations representing those parents, first meet the identified needs of migratory children that result from the effects of their migratory lifestyle or are needed to permit migratory children to participate effectively in schools; and (b) document that services addressing those needs have been met (34 CFR section 200.29(c)(1)).

(2) A schoolwide program must have the approval of the Indian parent advisory committee established in

Section 7114(c)(4) of ESEA (20 USC 7424(c)(4)) before funds received under the Title VII, Part A, Subpart

1 Indian Education program can be consolidated (34 CFR section 200.29(c)(2)).

(3) A schoolwide program may consolidate funds received under IDEA, Part B. However, the amount of funds consolidated may not exceed the amount received by the LEA under IDEA, Part B for that fiscal year, divided by the number of children with disabilities in the jurisdiction of the LEA and multiplied by the number of children with disabilities participating in the schoolwide program. A school that consolidates

IDEA, Part B funds may use those funds for any activities under the schoolwide plan but must comply with all other requirements of IDEA, Part B to the same extent it would if it did not consolidate funds under

IDEA, Part B in the schoolwide program (34 CFR section 200.29(c)(3)).

In addition, a schoolwide program school may consolidate funds it receives from discretionary programs administered by the ED Secretary; however, it must carry out the activities included in its application for which those funds were awarded. For example, if an LEA consolidates SIG funds (CFDA 84.377 and CFDA 84.388), which are discretionary at the State level, in a schoolwide program, the LEA must carry out the activities in its

SIG application and adhere to the requirements of each school intervention model it selects to implement in its

Tier I and Tier II schools.




(Sections 1111(c)(6), (9) and (10), 1114, 1306(b)(4), and 7115(c) of ESEA (20 USC 6311(c)(6), (9) and (10),

6314, 6396(b)(4), and 7425(c)); Section 613(a)(2)(D) of IDEA (20 USC 1413(a)(2)(D)); 34 CFR sections 200.25 through 200.29).


For further AOS guidance on schoolwide, see pages 17-22 of http://portal/BP/Intranet/AA%20Training%20Fall%202010/ODE%20Update.pdf

– Fall 2010.






), perform procedures to obtain an understanding of internal control sufficient to plan the audit to support a low assessed level of control risk for the program. Plan the testing of internal control to support a low assessed level of control risk for Special Tests and Provisions – Schoolwide Programs and perform the testing of internal control as planned. If internal control over some or all of the compliance requirements is likely to be ineffective, see the alternative procedures in §___.500(c)(3) of OMB Circular A-133, including assessing the control risk at the maximum and considering whether additional compliance tests and reporting are required because of ineffective internal control. For further AOS guidance on testing federal controls see http://portal/BP/Intranet/AA%20Training%20Fall%202011/FACCR%20Controls%20and%20Federal%20Update.pdf

–

Fall 2011.




WP Ref.






(LEA) a. For schools operating a schoolwide program, review records and ascertain if the schools met the poverty eligibility requirements. b. Review the schoolwide plan and ascertain if it included the required core elements and components described above. c. Review documentation to support:

(1) Consultation with parents including, when MEP funds are consolidated, the parents of migratory children or organizations representing those parents; and, when Title VII, Part A,

Subpart 1 (Indian Education) funds are consolidated, approval by the Indian parent advisory committee.

(2) If MEP funds are consolidated in the schoolwide program, the identified needs of migratory children were met before MEP funds were consolidated. d. Verify that funds were used in accordance with the schoolwide plan.

WP Ref.



N. Special Tests and Provisions – Schoolwide Programs (LEAs) e. Verify that the annual evaluation was conducted and actions were taken to revise the schoolwide plan in accordance with the evaluation results.


A.


B.


Effect on the Nature, Timing, and Extent of Compliance (Substantive Test) including Sample Size: C.

D.


E.




2015 LOCAL GOVERNMENT AGENCY FEDERAL AWARD COMPLIANCE CONTROL RECORD

(NOTE: The above sign-off boxes are n/a to AOS audits completed in Teammate. AOS auditors should perform their sign-offs in the Teammate system.)

5%

5%

5%

5%

5%

5%

5%

5%

5%

5%

Note:

total

Government Auditing Standards and Circular A-133 Audits

Government Auditing Standards and Circular A-133 Audits

Performing Tests to Evaluate the Effectiveness of Controls throughout this FACCR

AICPA Government Auditing Standards and Circular A-

133 Guide

AICPA Government Auditing Standards and Circular A-133 Guide

i.e.

ESEA

Flexibility

US Department of Education Cross-Cutting Requirements:

Consolidation of administrative funds

ESEA programs in this Supplement to which this section applies are: Title I, Part A (84.010); MEP (84.011); CSP (84.282);

21st CCLC (84.287); Title III, Part A (84.365); MSP (84.366) (at the LEA level only); Title II, Part A (84.367); and SIG

(84.377 and 84.388).

Schoolwide Programs

ESEA programs in this Supplement to which this section applies are: Title I, Part A (84.010); MEP (84.011); 21st CCLC

(84.287); Title III, Part A (84.365); MSP (84.366); Title II, Part A (84.367); and SIG (84.377 and 84.388).

This section also applies to IDEA (84.027 and 84.173) and CTE (84.048).

Transferability

ESEA programs in this Supplement to which this section applies are: 21st CCLC (84.287

) and Title II, Part A (84.367)

Prima Facie Case Requirement for Audit Findings

prima facie

prima facie

Waivers and Expanded Flexibility

ESEA Flexibility

ESEA programs in this Supplement to which ESEA flexibility applies are

Title I, Part A (84.010); 21st CCLC (84.287);

Title II, Part A (84.367); and SIG (84.377 and 84.388).

General and Program-Specific Cross-Cutting Requirements

Application Access

US Department of Education Cross-Cutting Requirements:

Federal Register

).

Consolidation of Administrative Funds

ESEA programs this Supplement to which this section applies are Title I, Part A (84.010); MEP (84.011); CSP

(84.282); 21st CCLC (84.287

); Title III, Part A (84.365); MSP (84.366) (at the LEA level only); Title II, Part A

(84.367); and SIG (84.377 and 84.388).

Schoolwide Programs

ESEA programs this Supplement to which this section applies are Title I, Part A (84.010); MEP (84.011); 21st CCLC

(84.287

); Title III, Part A (84.365); MSP (84.366); Title II, Part A (84.367); and SIG (84.377 and 84.388)

This section also applies to IDEA (84.027 and 84.173) and CTE (84.048).

Transferability

ESEA programs in this Supplement to which this section applies are: 21st CCLC (84.287

) and Title II, Part A

(84.367)

ESEA Flexibility

Cost Principles for State, Local, and Indian Tribal Governments

Cognizant Agency

Federal Register

Availability of Other Information

A Guide for State, Local, and Indian Tribal Governments (ASMB C-10); Review Guide for

State and Local Governments, State/Local-Wide Central Service Cost Allocation Plans, and Indirect Cost Rates;

DCA Best Practices Manual for Reviewing Public Assistance Cost Allocation Plans

Alternative Fiscal and Administrative Requirements

This section applies to all ESEA programs in this Supplement: Title I, Part A (84.010); MEP (84.011); CSP (84.282);

21st CCLC (84.287

); Title III, Part A (84.365); MSP (84.366); Title II, Part A (84.367); and SIG (84.377 and

84.388).

State or Local-Wide

Departmental

Divisional

State/Local-Wide Central Service Costs

State/Local-Wide Central Service Costs